Chapter 45  USDX: The Rebound Already in Place, Laid Out Short Positions Gradually(7.25)


During the Asian session on Tuesday (July 25), the US Dollar Index is trading in a narrow range, currently trading around 101.4. The US data yesterday was mixed, while the preliminary Eurozone PMI fell short of expectations across the board, which has boosted the Dollar Index. The dollar edged down today, revealing signs of weakness in gains. The Dollar Index also rebounded by 50% from 99.4-101.4, mainly due to the continued substantial improvement in employment. The recovery of the unemployment rate has temporarily mitigated the current bearish view of the US economy in a short period of time. Although it is almost a foregone fact that the Fed meeting at the end of this month will raise interest rates by 25bps, it is widely expected to be the last hiking of the year, which also limits the upside of the Dollar Index.

Important data for traders: Germany's IFO Business Climate Index for July, UK CBI Industrial Order Spread for July, UK Q3 CBI Corporate Optimism Index, and US Chamber of Commerce Consumer Confidence Index for July. Major events to watch include the release of the IMF's July 2023 World Economic Outlook.

Technical Analysis

Trading at the daily timeframe, the price closed a Doji Star on both July 14 and 18. The " double long-lower-shadow", coupled with the "positive divergence" pattern, has laid the groundwork for this dollar rally. As a result, the Dollar Index rebounded to 101.4, standing above MA5 and MA10, but stopping below MA20. Despite the golden cross of MACD has appeared, the Dollar Index is looking weak. Considering that this is also 50%, further rebound requires a greater injection of impetus, that is, stronger logical support. Therefore, perhaps the dollar's rally comes to an end in the short term.  

Investors are advised to keep going short under the price rebound trend. When the Dollar Index falls to around 101.4, investors are able to take a small short position. The stop loss should be set around MA20 at 101.7. The first target to take profit looks at 100.4 of MA10, where you should move the stop loss to break even. The second target will be 100.  

USDX: The Rebound Already in Place, Laid Out Short Positions Gradually(7.25)-Pic no.1

Trading Recommendations

Trading Direction: Long

Entry Price: 101.465

Target Price: 100.400

Stop Loss: 101.700

Support: 100.900/100.400

Resistance: 101.700/102.500

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