Two scenarios for the US Dollar index

We spoke about USDollar index last week and the possibility of a head & shoulders being formed.

As we can see from the chart, the second shoulder seems to be establishing although in order to have real confirmation, the price needs to fall below the neckline.

Last week we had more positive data from the US economy and the fact that the FED is looking to increase rates even more together with the turmoil in Emerging Markets, gives us more certainty that the Dollar will strengthen.

The scenario could be as follows:

a) Index falls below the neckline (area below $9420) and therefore we have the confirmation of the head and shoulders pattern. Probably the price will fall further until creating a new support above the 200 MA line around $9212. Price will than start moving up again.

b) The neckline is never breached so we will have a period of lateral movement on the upside and until it reaches the area of $9650.

How are you positioned? What are your views?

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