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

Technical outlook:

The US dollar index has also seen a whiplash price action as its counterpart EURUSD in the past two trading sessions. The index rallied to 102.65 after hitting an intraday low at 101.65 on Friday only to reverse all its gains and drop to 101.57 on Monday. It is seen to be trading close to 101.85 at this point in writing with a bullish bias in the near term.

The index has tested its recent swing lows at 101.50 but prices held higher, keeping the bullish scenario intact for now. The bulls need to break above the 102.65 initial resistance to confirm a further upside and regain control. A consistent drop below 101.50 will open the door for a test of the 100.50 swing low before the bulls are back again.

Furthermore, the RSI on the 4H chart has been producing a bullish divergence as highlighted here. Despite the price dropping to 101.57, the RSI held above its previous low, which is again bullish for the index. Short-term pressure might be seen towards the 101.50 support but a strong rally could be in the making thereafter.

Trading idea:

A potential rally against 1.1035

Good luck!