Hi Traders! US Dollar Index short term forecast update and follow up is here. On July 20th 2022 I shared this “US Dollar Index Technical Analysis And Short Term Forecast” post in our 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, based on the Heikin Ashi candles we can see that currently, we have strong bearish bodies in downward moving market conditions so it basically reflects a bearish environment. Also, we could see that the price which was moving higher has created a bearish divergence between the first high that has formed at 108.290 and the second high that has formed at 109.008 based on the MACD indicator. The price then moved lower and broke below the last low at 107.149 creating lower lows, thus forming a classical setup of bearish divergence followed by bearish convergence, we may consider these as evidences of bearish pressure. Generally, after a bearish convergence we may look for corrections and then further continuation lower. Currently, it looks like a correction is happening. 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. So everything looks good here for the bears. Until the strong resistance zone shown in the image below (marked in red) holds, my short term view remains bearish here and I expect the price to move lower further after pullbacks.
US Dollar Index H4(4 Hours) Chart Current Scenario
Based on the above-mentioned analysis, on the H4 chart, my short term view was bearish here and I was expecting the price to move lower further until the strong resistance zone holds. The price action followed my analysis exactly as I expected it to here. After the bearish convergence the pullback that I was looking for happened and most importantly the price was holding below the strong resistance zone. The price then moved lower further and delivered 270+ pips move to downside so far!
On the H1 chart, the market provided us with various facts supporting the bearish view. The price which was moving higher created a bearish divergence between the first high that has formed at 106.983 and the second high that has formed at 107.131 based on the MACD indicator. The price then moved lower and broke below the most recent uptrend line. We may consider these as facts provided by the market supporting the bearish view and also there we no signs opposing this bearish view. Then as you can see in the image below how the price moved lower further and provided an amazing move to the downside.
(Note: You can learn about a Killer Forex Strategy “Double Trend Line Principle” here)
So, traders, this is why I wanted to show this example to help you understand how important it is to follow the facts. The facts were supporting the bearish view here and there were no signs against it. When the facts do happen as we expected you can see how the price perfectly moved as per the plan. Because these are the kind of hints the market provides us at majority of the times and it’s our obligation as traders to be able to listen to these things that the market tells us and we should try to make the right actions accordingly.
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Happy Trading!
Arvinth Akash
Traders Academy Club Team.
