FX.co ★ #USDX analysis for September 4, 2013

The Dollar Index has reached our 82.50 bullish target. Now we believe that there are more chances of a small typical pull back towards the 38% Fibonacci retracement than a continuation of the rise. Prices have now high chances for a pull back as the upward move from 81.10 seems complete or nearly over.

The upward short-term trendline is almost broken and this is the first signal that the short-term top might be in. Breaking below 82.25 will confirm that the top is in and that the Dollar Index is entering a correction phase that could push prices towards 82-81.90. We believe the correction will be shallow and will not move beyond the 38% retracement. For now, we remain neutral for the short term. The intermediate term trend is challenged at 82.50 and I believe that eventually the index will move above that price level.

The daily chart above shows how close it was for the index to break below the long-term upward sloping channel. This is the reason why we kept believing that an upward reversal between 80.50 and 81.50 was very possible. Prices have now reached the 38% retracement of the decline but we believe that this is just a pause to the upward move and that the trend will continue at least towards 84. Concluding we are now neutral and will look to enter long once again near 82 or 81.90.