3 reasons why USDX momentum slowing down

Home / Market Updates / 3 reasons why USDX momentum slowing down

On #USDXDaily
On Monday, I posted that we should look for US Dollar index short. This is because last Friday 5th Spetember 2014, we had a doji after a big white candle. Price on Monday this week however manage to close above the high of the doji which indicates that the uptrend momentum will continue.

3 reasons why the momentum is slowing down:

1) Price on Tuesday manage to rally above the high of Monday but was not able to sustain the buy momentum. At the end of the day, price close below previous day high. Both candles on Tuesday (9th Sept)  and Wednesday (10th Sept) shows a spinning top candle which signifies the momentum is slowing down.

2) Price is trading resistance at 84.13. Price trading at resistance is one thing but spinning tops at resistance indicates that there is a potential reversal at this resistance. This area is the 2 year high of the dollar index.

3) The US Dollar Index buy trend is truly over extended. There was no reversal at all. As we all know the law of gravity, what goes up must come down especially if they did not go up gradually. The move was just too fast.

What to look out for:

I have highlighted the high of the spinning top in purple. That is the current de facto resistance to be broken. If there is a price close above that level, then price will test the 2 year high of 84.75.

Any bearish indication as published in my candle stick article, would see price retracing down to these possible areas of 83.59, 82.91, 82.41, 81.92. These areas are valid as long as the current year high stands at 84.52.

As usual, you can always have an option not to trade against the main trend is a buy. Alternatively you can wait for price to retrace to the said area and wait for bullish reversal signals before you attempt your buy again and ride the main trend.