Trade Set Up - We have the USD index on ‘high watch’ as this contributes to our holistic stance on trading the USD, notably using the weekly chart, which gives good structure and oversight. Currently, our view is cautiously long, but a break through channel support on a weekly basis would see us adopt a natural view. A close below 96.00 to 95.60 would further this view, indicating that the bull run since September has come to an end and would throw weight to our select USD shorts against the CAD and the AUD.With key support levels still in play, we have closed half our position to minimize risk and have a watchful eye on a move below the recent uptrend.
Why we like this trade - Based on a technical outlook, price has confirmed a bullish uptrend with continued higher highs and higher lows. That said, this trend seems to be coming to an end, where a confirmed weekly close through the September uptrend would change our view on the US dollar. We also are watching for a weekly close through the 11 September low at 95.60, especially with a cross in momentum oscillators.
This is a key chart for us, as the weekly chart is giving us some key levels to define our broad trading overview and the move to ‘high watch’ set-up marries nicely with the change in tone from the Federal Reserve of late and the dovish repricing in the rates market.
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