Last week, the Dollar index managed to create a new low before starting to appreciate again as forecasted by me last week. When we look at the chart above we can see quite aggressive bulls in the market. The daily chart shows that the market has made a 3 wave move and is now showing aggressive retracement. The reversal Head and Shoulder pattern broke last week but without much continuation with the sell.
This week is jam-packed, full of Fundamental News, from PMI’s to FOMC on Wednesday and finishing with NFP on Friday. Every day, besides Tuesday, the market could react to the news and cause more volatile movement than usual. Strong data will help the Dollar Index to continue its appreciation to the levels marked with the red horizontal line. A rejection from there could signify a possible 5th corrective wave down.
Technical rejection prices for the Dollar Index are either the 382 Fibonacci level at 101.00 or the 50% at 101.50. As you can see from the chart, I have marked a possible further resistance with the white diagonal line. The Dollar Index may well buy up to that resistance before continuing its depreciation.
The EURUSD has entered into a correction, as has the Dollar index. As seen in the chart above, you can see the aggressive bears in the market for most of the week, as I forecasted in my blog last week. Technically, as in the Dollar Index, we have a few potential bounces marked by the red horizontal lines. If the Dollar Index continues appreciating, I am expecting a bounce at either the 382 Fibonacci level or 50%, which corresponds to this price level: 1.0630 and 1.0580.
With regard to Fundamental News, we don’t have any major events coming out of the Eurozone. However, as the US has a very busy week on the news front, we will notice volatility in the market caused by this, rather than Euro news. Another currency pair I will be paying attention to is the EURGBP. This is because the UK will have a busy week with Fundamental Data (but not on Thursday).
Trade idea: Looking at the 4 hours chart, I notice a Rectangular Formation pattern being formed, which indicates a continuation of a sell. The New York market closed seeing the EURUSD making the first break of this pattern. It will be nice to see a retracement in the Monday session and take a sell position up to the support areas mentioned above.