The dollar index has been cruising lower in the past few days. Is there still a chance to catch a quick correction on the drop?
Here are the pullback levels I’m eyeing on the 4-hour time frame.
U.S. Dollar Index (USDX): 4-hour
The Greenback has been trending lower against its forex rivals recently, thanks mostly to stronger expectations of interest rate cuts from the Fed next year.
Recall that the December FOMC meeting hinted at possibly three rate cuts in 2024, weighing on demand for the U.S. currency while also boosting risk-on flows.
This allowed the ongoing USDX selloff to gain traction, as the pair’s lower highs are already connected by a descending trend line that’s been holding since November.
Another test of this resistance zone might be underway, and the Fibonacci retracement tool shows where dollar bears might be waiting to hop in.
I can see some confluence at the 50% Fib, which lines up with R1 (102.43) and a former short-term support area that’s also close to the trend line. A shallow pullback could find sellers at the 38.2% Fib near the pivot point level (101.91).
A larger pullback could reach the 61.8% Fib just below R2 (103.13) and the 103.00 major psychological level. Make sure you watch out for a return in bearish vibes that could take USDX down to the lows at S2 (100.73).
Don’t forget to keep an eye out for profit-taking activity before the end of the year, too!