🚀 AI-picked stocks soar in May. PRFT is +55%—in just 16 days! Don’t miss June’s top picks.Unlock full list

Chart Of The Day: Will The Dollar Rally Return?

Published 06/03/2021, 09:00 AM

The dollar climbed for the second day after Philadelphia Fed President Patrick Harker said yesterday that his central bank should begin discussing the time frame for paring back its bond-buying program. Reducing this liquidity in the system would most likely result in a jump in the value of the dollar.

Dollar Index Daily

The dollar climbed above its downtrend line since the Mar. 31 high for the first time, yesterday. While the price closed above the line, it closed at nearly the same price as it opened. As of now, the dollar actually created a medium-sized green candle.

Supply and demand may be forming a small rounding bottom. If the price closes above 90 we would consider it complete.

We have been bearish on the dollar for many months, until it completed a falling wedge. We then gave a bullish call, until it completed a rising wedge, to which we gave a medium-term short call while maintaining our long-term bullish stance. If the price will complete this rounding bottom, we expect it to retest the top of the small rising wedge at 93.50.

The MACD’s short MA crossed above the long MA, after bottoming out—and this is important—demonstrating how the broad trend is turning.

The 50 DMA fell to the top of the 100 DMA, which could be a support.

Trading Strategies

Conservative traders should wait for the rounding bottom to complete, followed by a return move that retests the pattern’s integrity, before committing to a long position.

Moderate traders would wait for the same breakout and dip, for a better entry, if not for further confirmation.

Aggressive traders could enter a long position at will, provided they accepted the higher risk that corresponds to the higher return for entering before the rest of the market. A trading plan is imperative. Here’s an example:

Trade Sample

  • Entry: 90.00
  • Stop-Loss: 89.50
  • Risk: 50 pips
  • Target: 91.50
  • Reward: 150 pips
  • Risk-Reward Ratio: 1:3

Latest comments

Loading next article…
Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.