FX.co ★ Trading plan for US dollar index on January 04, 2023

Technical outlook:

The US dollar index rallied through 104.50 during the New York session on Tuesday as projected before facing resistance. The index has slipped sharply towards the 103.50-60 area as the European sessions opened on Wednesday. The drop could be still considered as a pullback before the bulls are back in control pushing the price towards 105.50 and 107.00 respectively.

The US dollar index might have terminated its larger-degree corrective drop at 103.05 as seen on the 4H chart presented here. It further managed to carve a higher low around 103.12 last week before producing a rally of over 120 points. Ideally, the bulls would keep control and push the instrument through 107.00 at least, provided that 103.05 holds well.

The short-term wave structure could be described as follows. The first leg higher was completed at 104.50 on Tuesday as the second wave retraces back to the 103.50-60 zone. If the above structure holds well, prices would stay above 103.05 and continue pushing higher as the third wave unfolds. Only a break below 103.00 would nullify the above bullish structure.

Trading idea:

Potential bullish move against 102.00

Good luck!