The Dollar Index’s recent weakness can’t be attributed to the shift on the Euro (as we know, the Euro weighs the most in the Dollar Index basket). Yes, it had a big impact, but the USD is currently trading a bit lower on the vast majority of instruments (including commodities, JPY and CHF), and not only against the Euro.
Technically, the situation on the chart is rather negative. We have a false breakout (yellow) above the previous highs (96.8 green), which was the main technical trigger for the sell-off. The price also broke the uptrend line (blue), but that’s not extremely relevant because we can see that this line was broken recently too (red), which shows you that buyers won’t sacrifice themselves to defend it.
As for the current target, it seems that the orange area around the 38,2% can be a great aim for the sellers in the mid-term. Breakout of that support would be a major sell signal in the long-term but as for now, it is a bit too early to foresee that.
The 38,2 Fibo is first target for sellers right now, and that’s our mid-term scenario for the Dollar Index at this moment.
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