The USD index (daily chart) is on the plan we laid out for it in an update last week. From that update…
One option could be for a pop to the top of the channel, which would be in keeping with this oh so predictable (logical, at least thus far) 2022 market. USD could bounce in line with pro-USD, pro-Fed hawk, anti-asset market sentiment and drop again later. It’s a process, remember. An ultimate downside target – if this were to turn out to be a top of some kind – would be the 105 area. That is the major daily uptrend marker (orange SMA 200).
and…
Another option is that it is a bull flag forming. If that were the case the short-term downtrend could drag on for an indefinite period of time before a new surge in the bull market. In that case maybe 108 would contain the pullback.
Bottom Line
It’s still a bull flag consolidation as 108 contained the pullback. That would imply new highs to come. But a bull flag is also by definition a short-term downtrend. USD will not confirm new highs to come until/unless it breaks the channel. So theoretically it could be a new downtrend. But that is not worth pursuing actively at this time because the major trends for USD are up. We’ll keep an eye on what Uncle Buck does at the top trend line.
