The US dollar index has started to surge again, with the index hitting its highest level in nearly two years, as the risk-off tone is starting to see the US dollar crush most of the major currencies.
Most FX traders are cautious at the moment due to the Ukraine crisis, so it is very unlikely that we will see a big down move in the world’s reserve currency until the Ukraine crisis is resolved.
Moreover, with the FED rate decision next week we are likely to see the US dollar strengthen further, making the psychological 100.00 level the next major upside target for bulls.
It is likely that the US dollar index will strengthen after the next FED meeting, as the US central bank is almost certain to hike interest rates. This week’s CPI report will also be a big deal for the buck.
The ActivTrader market sentiment tool is showing that some 24 percent of traders are bullish towards the US dollar index, after this month’s big upmove in the greenback due to the Ukraine invasion.
The negative bullish skew is bad news for bears, as typically such overstretched negative sentiment from the retail crowd usually hints that the short squeeze on retail traders is going to continue.
US Dollar Index short-term Technical Analysis
Looking at the four-hour time frame, the technicals look like the US dollar index is running away to the upside after invalidating a large head and shoulders pattern.
According to technical analysis, the sustained breach of the 97.40 level has invalidate the bearish pattern. As stated previously, the only relief for bulls is that the US dollar index could find resistance at 100.00.
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US Dollar Index Medium-term Technical Analysis
The medium-term picture for the US dollar index is only bullish if buyers can keep the price above the 97.40 level, which is a key breakout zone for the US dollar index.
This 100.00 level is the area I am watching for the next powerful upside breakdown or reversal in the US dollar index. It was also a key battleground for bulls and bears on an historical basis.
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