The US Dollar Index is bouncing from a five-week low after repeatedly failing to break Fibonacci support at 101.13. ActionForex reads this as an initial bullish signal, but says more upside is needed to offset the downside risk.
The dollar regained traction on Thursday, bouncing from a five-week low. The index repeatedly failed at pivotal Fibo support at 101.13, the 38.2% retracement of $98.55/$102.72, and kept closing above that level. ActionForex says this formed a bear trap and generated an initial bullish signal.
However, near-term sentiment improved after the greenback was hit by the results of the US midterm election, and ActionForex says more work at the upside is required to neutralize existing downside risk.
Next, the recovery needs to cover Wednesday's gap to revive bulls. An extension above the converged 10/20DMA's at 101.72/76 would confirm the move and shift the near-term focus to the upside. A second positive signal is also developing on a false break below the recent range floor, which requires repeated closes above 101.25.
In the alternative scenario, a firm break of 101.13 would trigger a deeper decline. That would unmask supports at 100.64 (50% retracement, reinforced by 55DMA), 100.53 (100DMA) and 100.14/00 (Fibo 61.8% / psychological).
ActionForex lists resistance at 101.70, 101.95, 102.30 and 102.72, and support at 101.13, 101.00, 100.64 and 100.14.
Source: ActionForex
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