FX.co ★ Trading plan for US dollar index on May 16, 2022

Technical outlook:

The US dollar index raised through yet another high around 104.88 on Friday before facing resistance. The index closed the day carving a spinning top candlestick pattern on the daily chart, hence, the potential remains for an evening star to be produced today. Bears will be inclined to remain in control and hold prices below 104.88 going forward.

The US dollar index faces interim resistance around 105.00, while support starts from 102.30, followed by 99.65, 97.65 and lower levels respectively. Prices need to break at least 102.30 to confirm that a meaningful top is in place and bears are back in control. Only a consistent push above 104.88 will open the door to test 105.00-105.50 levels going forward.

Furthermore, the last high at 104.88 has produced a strong bearish divergence on the daily RSI as shown here. It is also a strong indication of a potential trend reversal against 104.88 going forward. Watch out for a break below 102.30 now for further acceleration as traders prepare to add further short positions.

Trading plan:

Potential drop to 102.30 and 99.65 against 105.00

Good luck!