FX.co ★ Trading plan for US dollar index for February 01, 2022

Technical outlook:

The US dollar index has now completed an Evening Star bearish reversal pattern on the daily chart as marked here. The index is now hinting at a potential turn lower towards 94.50-60 in the near term. Please note that 94.50 is initial price support and bears will be inclined to break lower to confirm a potential trend reversal and that they are back in control.

The index has carved the above bearish signal along with bearish divergence on the RSI (not shown here). High probability remains for the trend to reverse towards 89.20 levels in the next several weeks. The index might have carved a meaningful top around 97.40 and that prices should ideally stay lower from here.

The overall wave structure is also looking favorable to the bears. The index had earlier dropped between 104.00 and 89.20 carving a major downswing, which has been retraced to fibonacci 0.50 levels. If the above structure holds well, the next bearish leg should terminate below the 89.20 level going forward.

Trading plan:

Potential drop to 94.50 against 98.00

Good luck!