Following a dip below December lows last week the greenback has crept back above 79.60 to trade within a narrow range this week as we await further news from China.
At the time of writing we on the second consecutive 'inside trading day' after a volatile Doji on Friday but remain above December lows. We are also approaching a confluence of resistance which may cap any gains before we see a resumption of the downside move. At this stage the price action appears corrective and is yet to retrace 38.2% following Thursday's aggressive sell-off which originally saw us below December lows.
Even if we trade back up to 80.00 (or the 50% retrace) the downside is still the preference as we continue to produce lower lows and lower highs. Only a break above the 80.27 swing high would invalidate this view. Now that we have seen the initial break below 79.70, my preference is to see the USD Index trade back down to 79.00 over the coming week/s.
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