The charts below show the DXY spot index and the DXY continuous futures. The spot index is testing its previous low with bullish momentum divergences in place. This is a buy IF we see a strong Daily closing candle back above 75.60/76 spot level. Note the ending wedge type pattern on the continuous chart. I am sure there are many traders who will be shorting or have shorted this for a perceived breakdown. This is exactly what we are trying to exploit because if there is no follow through to the downside, a powerful bear squeeze is likely to ensue. I know sentiment is at extreme bearish levels towards the USD currently but I don't have the open interest data.
DXY Spot Daily:
DXY Continuous Daily:
Similarly, EUR is trading at the key 1.42/1.4250 level setting up a possible double top trade. Once again, as a trader you have to be prepared to sell into these market extremes as the risk/reward is just not there for being long. If this fails to sell and consolidation ensues, then we have a breakout setup in time.
EURUSD Daily:
The 60mins chart has shown a strong breakout since the clear consolidation pattern below 1.40. However, we have now hit a 1.618 projection of this pattern and some small momentum divergences are beginning to appear. It is still far to early to be calling a top but the targets are being reached.
EURUSD 60mins:
I am sure any USD strength will have strong implications for the AUDUSD cross. I have shown a clear resistance zone on the AUDUSD 60mins in my morning posttoday but for now I don't have a clear trade. I will update when appropriate.
In sum, I believe it is time to be looking for long USD setups. There are various ways to trade this setup but my preference has always been to wait for clear confirmation before executing. Thus, given these are Daily setups, I will be waiting for a bullish Daily close back above the "test" line.
Good Luck
Austin
