FX.co ★ Trading plan for US dollar index on May 25, 2023

Technical outlook:

The US dollar index continued to rally through new highs at 103.67 intraday on Thursday after finding support in the 102.50-55 zone earlier. The single currency pair is seen to be trading close to 103.65 at this point in writing as it approaches the Fibonacci 1.618 extension of its initial upswing between 100.34 and 101.80 levels respectively.

The US dollar index faces resistance around the 104.20-25 zone; while support is seen around 102.50-55 respectively. Also, note that RSI on the 4H chart shows a bearish divergence, indicating a potential turn lower soon before the rally could resume towards 105.50. A break below 102.50 will confirm that correction is underway.

The US dollar index might be well supported around 102.00, the past resistance-turned-support zone as marked on the chart here. On the flip side, a push through 104.70 from here will open the door to test 104.70 and higher. In that case, the rally would be complete without any meaningful retracement.

Trading idea:

A potential rally to continue towards 105.50

Good luck!