Hi Traders! Dollar Index forecast follow up and update is here. On January 13th I shared this “Technical Analysis – Dollar Index Forecast” post in my blog. In this post, let’s do a recap of this setup and see how it has developed now. If you would like to learn more about the way we trade and the technical analysis we use then check out the Traders Academy Club. Spoiler alert – free memberships are available!
My Idea
On the H4 chart, the price has created a bullish divergence between the first low that has formed at 89.460 and the second low that has formed at 89.150 based on the MACD indicator. Then the price moved higher and broke above the high at 89.940 creating higher highs, thus forming a classical setup of bullish divergence followed by bullish convergence. Hence as per the book scenario, after a bullish convergence, we may look for corrections to happen and then further continuation to the upside. Currently, it looks like the correction that we were looking for has happened, the price moved lower and reached a strong support zone, respected it, and is bouncing higher from this zone. In addition to this, we had a bullish hidden divergence that has formed between the first low that has formed at 89.150 and the second low that has formed at 89.875 based on the MACD indicator which we may consider as another evidence of bullish pressure. So everything looks good here for the bulls and until the strong support zone shown in the screenshot below (marked in blue) holds my view remains bullish here.
Dollar Index H4(4 Hours) Chart Current Scenario
In my forecast, I mentioned that “until the strong support zone shown in the screenshot below (marked in blue) holds my view remains bullish here”. On the H4 chart, the price action followed my analysis exactly as I expected it to. The price which moved lower respected the strong support zone and bounced higher from this zone. We also had a bullish hidden divergence that has formed between the first low that has formed on 6th January 2021 and the second low that has formed on 13th January 2021 based on the MACD indicator which we may consider as a fact provided by the market supporting the bullish view. We then had a good move to the upside which was blocked by a bearish divergence. The price then moved lower and we had a correction in the form of double wave to the downside but the price was holding above the strong support zone. The price then moved higher and broke above the most recent downtrend line which we may consider as another fact provided by the market supporting the bullish view. The price then moved higher further providing an amazing move to the upside.
(Note: You can learn about a Killer Forex Strategy “Double Trend Line Principle” here)
As traders we always have two choices, the first one is to fall in love with our analysis and try to convince the market and expect the price to move in the direction as per our wish. The second one is to follow the facts that the market provides us and make the right actions according to that. As you know the first option won’t help us and as you can see in the example above what happened when we followed the facts that the market hinted us and took the right action according to that.
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Happy Trading!
Yordan Kuzmanov
Chief Trader at the Traders Academy Club
