The US dollar index is most probably making a short-term bullish flag but with limited upside potential. The USDX is well-supported by dollar bulls, but traders should be very cautious specially today since we are awaiting the FOMC meeting.
Blue line – support
The US dollar index tested successfully the blue horizontal trend-line support, which was once resistance and got broken, This successful test implies that more upside should be expected today specially if we take into account the FOMC meeting scheduled for tonight. However, with stochastic at overbought levels bulls should be very cautious and use tight stops.
Black line – weekly resistance
The US dollar index is testing the important weekly resistance line. This could turn out to be a big rejection and we could see prices pulling back towards cloud support near 95. Volatility is expected to rise tonight, so traders should be very cautious and wary of potential fake breakouts. A confirmed breakout above resistance will imply all pullbacks should be bought as the longer-term target is seen at new highs.
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