In my previous article, I mentioned that the US dollar index was climbing to resistance levels where it came under selling pressure.
We maintained a bullish view in that article. But, we now believe the US dollar could be in for a reversal, and here's why.
Bearish View
- The red dot under the 19th close bar indicates a pre-condition for a reversal.
- Wave two could be over, and a new wave will commence in three parts to test the lower levels around 90.
- A gap between the 18th and 19th bars was closed today, as price gravitated upwards and closed below its open. That could be a continuation gap.
- MACD has crossed downwards.
- Hurst Cycle indicates that Oct. 24 is possibly the 18-month through, where the price may pause and head lower after Oct. 30.
- The volume of buyers was absorbed entirely and failed to produce a clear impulsive wave.
Forget moving averages in corrections such as this. Since the beginning of 2021, the USD has been zigzagging between the 89 and 94 range.
The following days will bring us new developments regarding the signal. We would like to see a red arrow down before confirming reversion.
Broader View
Pairs AUD/USD and USD/CAD have been on the rise, supported by COT - commercials with long signals and in well-defined impulsive waves.
The EUR/USD, which we thought might fail to revert, has resisted despite poor economic data. Meanwhile, the S&P 500 and the Dow Jones Industrial Average have shown strength.
It seems like the investing world is not concerned about higher inflation or Evergrande (OTC:EGRNY) as the volatility index has remained quiet, favoring long positions in stocks and short ones in the US Dollar.
Conclusion
There is a possibility that the USD is reversing, respecting the 0.382 Fibonacci immediate level. Should it continue to go up, it will be choppy, most likely in a consolidation. Unless, of course, any unforeseen economic event sends the market to panic mode.