FX.co ★ #USDX Analysis for October 4, 2013

The Dollar Index is bouncing upwards, as the downward move has completed 5 waves and a pull back has been anticipated. Prices are trading near 38% Fibonacci retracement. We expect the upward bounce to continue and it may reach 50% or 61,8% retracements as shown in the chart below.

The 50% and 61,8% retracements also coincide with the blue downward sloping trendline that is strong resistance. We remain bearish as long as prices stay below that trendline and those two retracements. If prices manage to break above 80.10, then we will have to reconsider if short-term trend has changed. Until then, the short-term trend remains downward.

The longer-term trend is downward and the bigger picture is not good for bulls. The longer-term upward sloping trend channel is broken and prices are heading towards the 78.75-78.50 lows. The trend reversal at a daily level will come only if prices break above the 82.75 level. We trade according to our short-term trend signals and that is why we remain short. 80.10 is short-term stop for bears.