USD Bulls on the RopesThe US dollar (USD) – per the US Dollar Index – is on track to end February on the ropes following January’s monthly indecision candle at the resistance of 109.33. I believe USD bears have space to drive towards a ‘local’ descending support around 105.40ish, extended from the high of 107.35.
Similarly, the daily timeframe demonstrates scope for sellers to strengthen their grip. Last week witnessed the Index reject resistance at 107.05, drawing focus towards an ‘alternate’ AB=CD from 105.77 (the 1.272% Fibonacci projection ratio). For those unfamiliar with Harmonic trading, an alternate AB=CD is simply an extended equal AB=CD formation using either 1.272% or 1.618% Fibonacci projection ratios. Interestingly, not only does the alternate AB=CD pattern share chart space with daily support at 105.62, but these daily levels are located just north of the monthly timeframe’s descending support line underlined above. Consequently, although there is room for bears to take control in the short to medium term, the combination of the monthly and daily support levels could entice profit-taking and encourage fresh long positions into the market, should we reach said area.
Given monthly and daily charts echoing a bearish vibe, I will primarily focus on short-term resistance levels this week. One standout area of H1 resistance is between 107.24 and 107.14, made up of two trendline resistance lines (drawn from 109.88 and 106.57), a horizontal resistance level and two Fibonacci retracement ratios (78.6% and 38.2%). What is also interesting from a technical perspective is that the above-noted H1 resistance zone converges closely with daily resistance mentioned above at 107.05, therefore should the H1 resistance area be tested, the fact daily resistance is also present could add weight to a bearish showing. Should we fail to reach as high as the H1 zone, my next base case scenario is to watch local H1 supports to cede ground to trigger possible selling opportunities: the 106.43 low, for example.
