Hi Traders! Dollar Index forecast and technical analysis is here. We do our analysis on the MetaTrader4 platform (MT4). Some very interesting and useful tips and hacks about the MT4 platform could be found here. 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! This analysis will be based on price action trading (if you want to learn about price action trading, you can watch this video here).
On the daily chart, the price which is moving lower has reached a key support zone formed by the 100%(89.660) Fibonacci expansion level of the big wave and the 100%(88.785) Fibonacci expansion level of the small wave we have. The price is currently holding in this key support zone and also we have a false break of the low at 89.625 which we may consider as evidence of bullish pressure. In addition to this, we have a bullish divergence that has formed between the first low that has formed on 31st July 2020 and the second low that has formed on 6th January 2021 based on the MACD indicator. Also, we have a downtrend line breakout based on the CCI indicator, we may consider these as other evidences of bullish pressure. We may now move down to lower timeframe and see if we can find evidences supporting this bullish view.
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 D1(Daily) Chart Analysis
Dollar Index H4(4 Hours) Chart Analysis
It is always recommended to look for confirmations before you jump into any trade. If you are not sure about how to trade this buy setup then you can use any setup and strategy that you have in your arsenal to look for bullish moves and join this buy trade.
Also, don’t forget to protect your buy trade using a stop loss and make sure to set a target and keep a proper risk/reward ratio.
You will also find a pretty extensive database of educational materials here in the blog – just use the search or check out the Forex Education section above.
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Happy Trading!
Yordan Kuzmanov
Chief Trader at the Traders Academy Club
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