Hi, and welcome to this Blueberry Markets video update with me, John Kibbler, Head Currency Analyst.
In this video, we’re going to go through the US Dollar Index. Take a look at some seasonal charts and try and see where the US Dollar could head next.
On this weekly timeframe, you can clearly see that the US Dollar Index has broken recent swing lows, about 9855.
On a daily timeframe, this was the range that we were looking at: from 101 to the 9855 level.
Now the price broke out of that range, breaking through those weekly lows. The US Dollar is continuing to sell-off.
We discussed in the Forex Market Outlook that you could look to sell the US Dollar if the market pulls back into these range lows and then continue to the downside. But where could we expect to see the US Dollar find support? The most obvious place would be in these swing lows here.
Let’s go take a look at some seasonal patterns because that might give us an idea of when the market could find a bottom.
If we go to the US Dollar Index on the seasonal chart, we can see that the market rallies through May.
And we did get a slight rally out of the US Dollar but it didn’t last very long. Halfway through May, it started to fall and it probably would through June as well.
We have to know if the price finds a top in the market. Now, we want to look for a clear bottom around the end of July and the start of August. That could signify that the US Dollar Index will continue to fall or the US Dollar until then
Plenty of US Dollar weakness to come, according to the seasonal data. How can we trade this? EUR/USD is heavily weighted to the US Dollar Index, and we can see that the price broke through these highs again.
In the Forex Market Outlook, we suggested looking for buying opportunities if the price came back here. Unfortunately, the price is continuing to rally.
So we just need to wait for that pullback before we look to buy the market.
But in the meantime, you can just follow these lower timeframe trends. If I go to the hourly timeframe and put on the averages, you can see that the price is in that nice uptrend.
I’m waiting for the price to pull back to these hourly zones and then look for the market to bounce. For example, when that price broke out, rallied, retested this area, rallied, then found consolidation.
It was quite interesting to see this move where the price tried to break through these lows, failed, then rallied once again.
I’ll be marking up those key areas of support and resistance where the market retested and rallied. If the market continues to form higher highs, just piggyback that trade to the upside.
So with EUR/USD, you’ll want to watch as the price continues to move. We could see EUR/USD head all the way back up into that 11450 area.
If we just go take a look at the weekly timeframe, you’ve got that key level through here. That opens and closes quite interestingly because that’s around 113, which is another big zone on EUR/USD.
If you look left, you’ll see a really good area of resistance. The price is heading towards 112. It would be interesting to see how the market reacts from that point.
If the price breaks above 112 and holds above it, then I think that the price could easily rally to the 113 level on EUR/USD.
That’s going to be really interesting to watch. But looking at that US Dollar downside, according to the Dollar Index, this could last much longer. So, keep your eye on this move.
I hope you enjoyed this video update, and I’ll catch you in the next one.
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