The U.S. dollar index (USDX) looks to be at the crossroads between turning more bullish or returning to a downtrend. Last week saw the USDX post a new 4-week low of 88.94 before rallying to close 0.40 higher for the week at 89.97. Meanwhile, weekly stochastics have established consecutive bullish crossover below the oversold level of 20%, indicating the previous 3-wave downtrend has come to an end.
But that new 4-week low is troublesome for those bullish the dollar, like me. It would indicate that Wave 1 of the recently established 5-wave uptrend has already come to an end with the USDX failing to test initial resistance at the 23.6% retracement level of 91.93. If the USDX is indeed now in Wave 2, a near full retracement of Wave 1 would be expected, possibly beginning this coming week. What that means is the USDX could soon find itself back at its recent low of 88.25, looking for new buyers.
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