- Analyzing the recent price action in the Dollar, which appears oversold.
- Different ways this can affect our trades in other assets.
Introduction
Today we look at the Dollar index because it has a widespread effect on all markets. Generally, when the Dollar rises in value, stocks fall, and vice versa. It also drastically affects the Oil and Gold charts.
Let us take a look at the technical formations that can give us a better idea of the short-term direction of the greenback and then how it may affect our trading decisions in other assets, such as index futures and commodities.
Technical
The double bottom formation could signal that DXY is set for a consolidation period for the next couple of weeks which means we can expect the Dollar to hover around $102 against a basket of currencies. There is nothing to look at regarding oscillators at this time, but the price action speaks for itself.
What this means for our trades
Gold futures (GC) and Crude oil futures (CL) should see a sharper decline if the Dollar rallies compared to the indices, but it’s important to take note of this. Extreme bullish outlooks can now be toned down a bit when it comes to those assets due to the price action of the Dollar, which appears to be slightly oversold at this time.
