Last week, I wrote that I expected the Dow Jones-FXCM US Dollar Index
to break a resistance level
at 12,040 points. The failed break at the beginning of the week was followed by a 1% drop yesterday, that cannot be explained by hard fundamentals. I think it had to do more with repositioning by traders who had bought the greenback too late on Friday/Monday (i.e. short squeeze on EUR/USD
). This morning I have noticed that the USDOLLAR
seems to be stabilizing just above a bullish trend line
coming in from the June lows. This would be the third test necessary to confirm the presence of such a trend line
for all those die-hard tech traders. If the dollar bounces back up to levels seen Monday, my initial call for a bullish
breakout above 12,040 points would still be in play. Any longs initiated at current levels have a decent risk/reward ratio as stops are relatively tight (just below 11,060 points should be fine).