The Dollar Index did not do much yesterday and traded around the 50% Fibonacci retracement, very likely making a bottom formation. We remain neutral and wait for an entry signal as we believe that it is more possible for the index to continue upwards.

We expect an upward bounce towards at least 82.25. At that price level we should get a clearer picture whether the bullish or bearish scenario will prevail. The bearish scenario sees three waves up from 80.76 and 5 waves down from 82.66. This implies that further downward movement is expected. The important level that would cancel this scenario is the recent high at 82.67 and if prices rise upwards in an impulsive pattern.

The bullish scenario as shown in the daily chart above, sees 5 waves up from 80.76 and a downward correction to the 50% retracement. Bulls should hold 80.76 which is the start of the upward wave move. Prices from 84.75 have not fallen in an impulsive pattern, something that implies that the longer-term trend is not downward. Bulls will need to move upwards in an impulsive pattern and break above 82.67 highs. We remain neutral as there is still no clear sign. Short-term trend remains downward but prices are supported at 81.65 and 81.50.