Let’s take a quick look at a Fibonacci Retracement Confluence Grid (chart) for the US Dollar Index and see what levels are critical support and potential future targets for the index. The chart above shows the US Dollar Index ($DXY) on the hourly chart with five Fibonacci Retracement grids stretching from the recent closing high near the 83 index level. Cutting straight to the point, we see three short-term/intraday confluence levels and we’ll address them from high to low. The circled numbers represent the number of Fibonacci Retracement levels that converge into a given price. First, we see the recent ‘double confluence’ into the 82.50 area which was a relatively insignificant area, but when combined with the first “triple confluence” level above 82, we see a better picture. So far in March, the index has bounced strongly – even with gaps – off the 82 pivot level which makes it the most important near-term confluence support barrier to highlight. If you look closely, you can see the 82 level develops as a result of three 38.2%, 50.0%, and 61.8% near and longer-term Fibonacci retracement levels. For the moment, the Dollar has held the 82 confluence and trades between the recent high and the two near-term Fib levels. Those will be focal points for near-term traders. A near-term breakthrough (trend continuation) above 83 extends the short-term target upward toward the 84 level. That’s the bullish thesis. However, a firm near-term breakdown under the price polarity (support) and triple Fibonacci confluence opens the index to fall through “Open Air” toward the third confluence/overlap area into 81.50. In simple terms, a break under 82 targets a sudden impulse toward 81.50 for a target and potential bounce. A future breakdown under 81.50 suggests that the Dollar is not necessarily in short-term “Retracement to Find Support and Rally” mode, but instead in a likely breakdown (short-term/intraday reversal) and thus lower targets such as 81, 80.50, and back to 80 become future zones to play for on the swing or intraday basis.That would be the bearish outcome thesis. While this was a quick one-indicator/concept update, join the fellow members of the “Intermarket Analysis” membership for updates each weekend (and the broader themes of Risk-On/Risk-On Money flow in related markets).
updated Mar 18, 2013
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