Early on Wednesday, dollar bulls are on the defensive as sellers put pressure on the US dollar. The US dollar index is right on the top of the channel support but a bigger downward correction is justified by the daily stochastics towards at least 97.50.

Blue lines - bullish channel

Red lines - bearish divergence

As per our analysis of the bearish divergence signal that was given when prices were at 99.90, the US dollar index made a pullback as expected and has reached support area at 99.30, while the stochastics in the 4-hour chart have moved towards the overbought levels. The price is now testing the channel and cloud support. Breaking below 99 will open the way to 97.50.

The daily chart above shows how close to resistance we are now and how overbought the stochastic is. The level of 98.75 acts as the daily support. If it gets broken, then expect the 38% Fibonacci retracement to be tested. I prefer to be bearish or neutral than long at current levels.