The U.S. Dollar Index (DXY) has formed a Head and Shoulders pattern on the 4-hour timeframe, signaling a potential bearish trend. After breaking the neckline, DXY has dropped significantly and is now approaching a major demand zone (103.50-104.00), where buying pressure could emerge.
Key levels to watch:
Support Zones: 103.50 - 104.00 (Strong demand area)
Resistance Zones: 105.50 - 106.50 (Previous support turned resistance)
Trade Idea:
Entry: Around 103.50 - 104.00
Target: 106.00 - 106.50
Stop Loss: Below 103.00 (to avoid further downside risk)
Risk-to-Reward Ratio: 1:3
Impact on Forex Pairs:
If DXY moves up, currency pairs with USD as the base currency (e.g., USD/JPY, USD/CAD, USD/CHF) will likely move higher. On the other hand, pairs where USD is the quote currency (e.g., EUR/USD, GBP/USD, AUD/USD) will likely move lower as the dollar strengthens.
Conclusion:
If price holds at the 103.50-104.00 support, we may see a short-term bullish move towards 106.00-106.50. However, a break below 103.00 could lead to further downside pressure. Traders should also monitor major USD pairs for potential trade opportunities.
Key levels to watch:
Support Zones: 103.50 - 104.00 (Strong demand area)
Resistance Zones: 105.50 - 106.50 (Previous support turned resistance)
Trade Idea:
Entry: Around 103.50 - 104.00
Target: 106.00 - 106.50
Stop Loss: Below 103.00 (to avoid further downside risk)
Risk-to-Reward Ratio: 1:3
Impact on Forex Pairs:
If DXY moves up, currency pairs with USD as the base currency (e.g., USD/JPY, USD/CAD, USD/CHF) will likely move higher. On the other hand, pairs where USD is the quote currency (e.g., EUR/USD, GBP/USD, AUD/USD) will likely move lower as the dollar strengthens.
Conclusion:
If price holds at the 103.50-104.00 support, we may see a short-term bullish move towards 106.00-106.50. However, a break below 103.00 could lead to further downside pressure. Traders should also monitor major USD pairs for potential trade opportunities.
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Related publications
Disclaimer
The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.