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A bit of risk-taking dragged the dollar lower across the board.

Are we looking at a retracement or the start of a reversal?

I’m looking at the Dollar Index’s 1-hour chart for clues!

U.S. Dollar Index (DXY): Daily

U.S. Dollar Index (DXY) 1-hour Forex Chart

U.S. Dollar Index (DXY) 1-hour Forex Chart

If you’ve been trading the U.S. dollar, then you’ll know that the safe-haven has been making pips rain against its major counterparts.

…except in the last trading sessions.

See, a combination of bargain hunting, easing inflation concerns, lower Treasury yields, and FOMC member Brainard talking “overtightening” risks have dragged the dollar lower across the board.

The U.S. Dollar Index, which has been in an observable uptrend since mid-August, dipped from a weekly high at 110.75 to trade at the 109.50 zone.

Thing is, 109.50 lines up with the bottom of an ascending channel AND the 200 SMA on the 1-hour time frame.
Are we looking at a legit pullback opportunity? Or is the dollar ready for a short-term reversal?

Traders who are taking cues from Stochastic‘s “oversold”-ish signal can buy at current levels and place stops below the 200 SMA support for a good risk ratio.

September’s highs near 110.75 is a good initial target but you can also aim for new monthly highs if traders return their focus to high inflation, high interest rates, and lower global growth.

Not confident that the dollar can gain any more points across the board?

Look out for a clear break below the channel and the 200 SMA, which could take DXY to previous inflection points near 108.35 or 107.50.

This content is strictly for informational purposes only and does not constitute as investment advice. Trading any financial market involves risk. Please read our Risk Disclosure to make sure you understand the risks involved.