FX.co ★ Trading plan for US dollar index for January 31, 2022

Technical outlook:

The US dollar index had rallied through 97.40 levels on Friday before finding resistance and pulling back. The index staged an impressive rally between 94.50-60 and 97.40 in the past two weeks, which could be the last leg. The rally since 89.20 lows might be complete at 97.40 over the last week as bears prepare to come back in control.

The overall wave structure in the US dollar index since March 2020 highs around 104.00 is also depicting a bearish outlook. The earlier drop between 104.00 and 89.20 could be considered to be primary downswing. It was followed by a corrective rally between 89.20 and 97.40 levels carving a counter trend.

Also note that the index has retraced over fibonacci 0.50 retracement of the earlier downswing as depicted on the daily chart here. High probability remains for a bearish Evening Star candlestick pattern to be unfolded. If successful, it will confirm a meaningful top is in place and that bears are back in control.

Trading plan:

Potential drop through 94.00 against 98.00

Good luck!