In this article, we will share our top-down trading technical analysis for the DXY.
On the monthly DXY chart, we can see that the instrument has formed a downside sideways Pitchfork channel and the instrument is testing the median line 94.60 level for a break higher into the other half of the channel and a test of the 98 level. This swing upside was followed by the bounce of the 50% Fibonacci retracement at the beginning of the year.
The weekly DXY chart is revealing the possible Inverted H&S (head and shoulders) formation. This is a bullish formation with the neckline at the 95.20 level, which needs to be broken, for the formation to be confirmed. This level is also a 200 SMA and represents a strong upside resistance. In the case of another week failure here we could see a deeper pullback into the 92.30 which is the shoulder support.
By using our top-down trading technical analysis we have identified the key levels that will be your guide for making a trading strategy on USD pairs. The daily chart is indicating a strong support at the 94.30 level which needs to hold for a break above the mentioned neckline of a possible H&S formation. The daily close below this level will lead to a deeper pullback into the 92.50 level, which is the last line of defense for a bullish breakout.
Happy trading! (click on the chart to enlarge it)
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