The Dollar index topped yesterday and as we mentioned in our analysis yesterday, breaking below support levels would confirm our view that a top is in and that it is time for the index to make a bigger degree correction. As we noted several times before, the upward move from 80.50 was almost if not already complete and that a pullback towards at least the 38% Fibonacci retracement would take place. Last night prices broke out of the upward sloping channel.

As support levels failed to hold, prices accelerated downwards as prices moved outside of the upward sloping channel. Interruption of the pattern of higher highs and higher lows gave us a clear signal that a bigger degree correction had started. We will now look for the possible bottoming area as we still believe that as long as prices trade above 80, the longer-term trend will be bullish for the Dollar Index.

The Dollar Index not only met our first target of the 38% Fibonacci retracement, but also moved lower towards the 50% retracement. The entire downward correction could already be over, but we will remain neutral as only the first part of the correction may have ended. We could expect an upward bounce and then another final leg down towards the 61.8% Fibonacci retracement. Concluding, we remain neutral.

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