FX.co ★ #USDX analysis for November 8, 2013

The ECB rate cut decision pushed the Dollar Index to new short term highs. In yesterday's analysis we noted that for the trend to change to bullish, prices should break above the blue downward sloping trend line at 80.75. Once this resistance level was broken, the upside potential would be near 81.50.

Prices have only retraced 23% of the entire rise from 79 to 80.95. The upward break out after the rate cut decision by ECB has pushed the index towards 81.50, only to see the index pull back and back test the broken trend line. Now trading near 81, prices are consolidating after the volatile trading day that was the result of the rate cut. Prices will need to move above 81.15-20 for the bullish trend to become strong again.

Prices reached the longer-term broken trend channel yesterday. There are increased signs of a longer-term trend reversal here. Bears should be extra cautious and bulls should be patient to buy near support levels. For now, bulls should remain long, as long as prices trade above 80.50. Breaking below this level will push prices towards 79.75. The longer-term trend, we believe, has changed to up and we could target 86-87 by the end of the year.