Hi Traders! Dollar Index technical analysis and forecast is here. The way I would like to analyze the chart for setups is based on multi-timeframe confirmations because in my POV if we get more evidences on different timeframes for the same direction then it makes the setup much more reliable. 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! Let’s start our analysis from the highest timeframe which will be the weekly chart here.
Dollar Index W1(Weekly) Chart Analysis – Strong Resistance Zone, Potential Bearish Divergence, Stochastic Oscillator
On the weekly chart, after the strong bearish move currently it looks like a correction is happening in the form of double wave to the upside and the price has reached a strong resistance zone and is holding in this zone. Also, we could see that the price has created a potential bearish divergence between the first high that has formed on 28th March 2021 and the second current high that has formed at 10th October 2021 based on the MACD indicator which we may consider as evidence of bearish pressure. In addition to this, based on the Stochastic Oscillator we could see that the price has reached its extreme which we may consider as another evidence of bearish pressure. So everything looks good here for the bears and we may now move down to lower timeframe and look for evidences supporting this bearish view.
Dollar Index H4(4 Hours) Chart Analysis – Bearish Divergence, ADX Indicator
On the H4 chart too we have a bearish divergence that has formed between the first high that has formed at 94.493 and the second high that has formed at 94.535 based on the MACD indicator which we may consider as evidence of bearish pressure. In addition to this, the ADX indicator gave a bearish signal here at the cross of -DI (red line) versus +DI (green line) and the main signal line (silver line) reads value over 25 which we may consider as yet another evidence of bearish pressure. Until the invalidation level shown in the image below holds my view remains bearish here. If we get a valid breakout below the low at 93.650 we may then consider it as a validation for the bearish view and may expect the price to move lower further.
Technical Analysis & Forecast Summary
Dollar Index W1(Weekly) Chart Analysis
- Strong Resistance Zone, Potential Bearish Divergence, Stochastic Oscillator
Dollar Index H4(4 Hours) Chart Analysis
- Bearish Divergence, ADX Indicator
Trading Tips
It is always recommended to look for confirmations before you jump into any trade. If you are not sure about how to trade this sell setup then you can use any setup and strategy that you have in your arsenal to look for bearish moves and join this sell trade.
Also, don’t forget to protect your sell trade using a stop loss and make sure to set a target and keep a proper risk/reward ratio.
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Happy Trading!
Arvinth Akash
Traders Academy Club Team
