Technical analysis of USDX for May 11, 2016

The Dollar index is showing signs of a reversal and a short-term top in the making. I prefer to be neutral at current levels and wait and see if the pullback that I expect is supported and at which level buyers step in. We could have seen a long-term low in the Dollar index and we could be at the beginning of a new upward move.

The Dollar index is expected to pull back at least towards the 38% Fibonacci retracement and the upper cloud boundary near 93.20-93.30 area. We cannot rule out a deeper pull back towards the 61.8% Fibonacci retracement but for that we have to be patient. Stochastic is overbought and diverging and crossing below 80. This is a sell signal so Dollar bulls need to be very cautious.

Red line - resistance trend line

The Dollar index has reached the downward sloping trend line in the Daily chart and shows signs of rejection. This is a warning for bulls and as prices have risen back towards the consolidation area of 93-94, this is a neutral area and possible reversal area too. Another reason why Dollar bulls need to be very cautious.

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