Technical outlook:

The US dollar index dropped through 101.49 on Tuesday before finding some bids. The index has pulled back since then and is seen to be trading around 101.80 at this point in writing. Bears have already managed to enter the market by breaking below initial support around 102.30. Short-term pullbacks remain possible but they should be capped below 104.88.

The US dollar index might have carved a meaningful downswing between 104.88 and 101.49 or could be somewhere in proximity. If the above is correct, bulls will be inclined to produce a corrective rally through 103.60, which is also the Fibonacci 0.618 retracement of the bearish drop. The index is expected to resume lower thereafter.

The US dollar index's downside target potential remains around 99.40 and 96.00 levels respectively. Also, note that 96.00 is just above the Fibonacci 0.618 retracement of the entire rally between 89.50 and 104.66. A high probability remains for bulls to come back in control if prices manage to reach the 99.50-96.00 area.

Trading plan:

Potential drop towards 99.00 and 96.00 against 104.88

Good luck!