The chart: the dollar to 118..this is what separates it from it | Investing.com

A decline of 0.15% as China moved to reduce the duration of its internal quarantine to 7 days from 10 days. The dollar’s decline followed Wednesday’s 0.75% jump, the strongest growth in a week, as rising UK inflation raised concerns about interest rates. The cost of food in the UK rose 14.6% annually in September, the strongest rise in 42 years.

Headline inflation jumped to 10.1% from 9.9%, and is likely to rise further. Today, the Pound fell 0.9% for the second day, totaling 1.25% lower.

I do not expect the current decline in the dollar to continue, this is just a short-term response to the possibility of a shorter Chinese quarantine. Bearish bets on Asian currencies also continued in light of the Federal Reserve’s ongoing tightening, forcing other central banks to keep up. The dollar crossed the dramatic 150 level against the yen for the first time since August 1990 and hit an all-time high against the Indian rupee at 83.268.

The dollar was also supported by higher yields, with the 10-year bond yield hitting 4.178% for the first time since June 2008. Conversely, it is down 0.5%, close to the September 28 low of $1,618, not seen since April 2020. We expect Gold drops to $1,300.

US dollar index

US dollar index

dollar index daily chart

The US currency is forming a bullish flag after it jumped 500 pips in just five days. For traders to make profits, short positions are required. However, persistent demand supported the contracts, keeping the price within its ascending channel. A bullish breakout will complete the pattern, indicating that demand continues to outpace supply. A breakout is likely to trigger a technical chain reaction, as short pressure multiplies catalytic longs to push the price higher again. When the short squeeze ends, the dollar’s rally will ease, and possibly fall. However, when the pattern provides support, it will confirm the upside, go to the second leg up, and at this point, attract more bullish speculation.

Trading Strategies

Conservative traders should wait for the bullish breakout to close above 114 and then start a move back to show continued support before risking a long position.

Moderate traders can content themselves with an intraday breakout at 114.00 and wait for a pullback for a better entry, if not to confirm.

Aggressive traders can buy with a close above the pattern.

Trading Forms – Buying Positions

adventurous strategy

  • Entry: 113.25

  • Stop Loss: 112.25

  • Risk: 100 points

  • Target: 117.25

  • Profit: 400 points

  • Risk-Reward Ratio: 1:4

moderate strategy

  • Entry: 113.25 (after breaking through 114.00)

  • Stop Loss: 111.75

  • Risk: 150 points

  • Target: 117.75

  • Profit: 450 points

  • Risk-Reward Ratio: 1:3

conservative strategy

  • Entry: 113.25 (after closing above 114.00)

  • Stop Loss: 111.75

  • Risk: 150 points

  • Target: 117.75

  • Profit: 450 points

  • Risk-Reward Ratio: 1:3

Note: These are generic models. When you combine your timing, budget and mood, you will achieve statistically profitable results over time. Good luck trading!

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