FX.co ★ #USDX analysis for December 6, 2013

The downward corrective move that started at the highs at 81,50 for the Dollar index is still in force and pushed prices yesterday towards the 50% Fibonacci retracement of the entire 79-81,50 move. We continue to believe that this downward move is corrective and that a reversal will eventually come, but for trading reasons we remain neutral unless we see some signs of strength. Such a sign will be the break above 81,15.

We warned that if prices were to break the triangle we would see a short term trend towards the direction of the break. Prices have broken the triangle downwards and pushed towards the 50% retracement. Next important support is found at 79,95-80 where the 61,8% Fibonacci retracement is. So unless we see prices break above 81, we should expect the index to move towards 80.

The daily chart shows clearly that the sideways slide of the index is still inside the downward sloping channel and that the MA support was broken. This means more weakness and increased chances of continuing lower towards the 61,8% retracement. Prices will need to break above 80,75 and 81 on a daily basis to confirm a trend reversal. We are neutral expecting signs of strength to enter long.