DXY-USD currency Index top-down trading technical analysis
A lot of pain is in the Forex market at the moment. Traders got caught in a vicious round of swinging market. One of the main reason for this is the USD consolidation against the majors. So, we will go deeper by looking at all the time-frames on DXY to see where are the key points for a possible breakout, reversal or continuation.
Looking at the DXY quarterly chart and the monthly chart it is so far clear that we are in a corrective pullback of a downtrend which lasts from 1990. A corrective pullback swing higher is happening inside the long-term downtrend channel. It was on hold by the 61.8% Fibonacci 1999-2008 swing lower retrace 102.100 level.
After it bounced off the 200 SMA (monthly) we are in a medium-term uptrend which is heavily supported by the 94.720 level. This level is a key point as well for a possible downside reversal and a test of 92 and lower. For this to be valid we need to see a confirmed daily close below it.
Weekly and daily chart both confirm a critical 94.700 level for turning lower. As long as this level is holding we could see more swing inside a formed wedge, where a daily close above the 96.100 would give you much more certainty that we could have an upside continuation into 98 and higher. We are considering this to be a corrective swing down inside the wedge and we are expecting the upside rotation and another test of 96.100 for a strong upside breakout.
Supportive price action around 94.720 would give swing traders confirmation of a swing higher and a daily close below this level would indicate reversal and a USD weakness through 2019. Uptrend continuation will be confirmed on a daily and weekly confirmed close above the 96.100.
We have used the combination of the top-down trading analysis to get these key levels explained on the charts.
