The greenback is no longer constrained by a technical anomaly.
The dollar index’s six-week rally has now filled a long-standing price gap at 106.613, dating back to early November 2023. A gap represents a price range where no trades occurred, and closing one removes that informational void, allowing traders to take positions without the need to account for this unfilled space.
With the gap now closed, both bulls and bears are free to engage without the technical uncertainty. Bears could have the advantage, as the dollar appears overbought, and historically, filling a gap often triggers a price reversal.
Examples of such reversals include EUR/USD in March 2020 filling a gap from April 2017 at 1.0770), USD/JPY in February 2020 filling a gap from May 2019 at 111.08), and EUR/CHF in 2018 closing its 2015 flash-crash gap.
On the other hand, a double-bottom pattern near the key psychological level of 100 suggests a potential repeat of the dollar’s strong rallies seen in 2014-2015 and 2021-2022.
The greenback’s direction hinges on price action around the 2023 high of 107.35. Failure to break above this level would suggest the index will pivot toward the bottom of its 100-108 three-year range. Conversely, a move above 107.35 would signal renewed momentum, potentially propelling the index to the 2023 peak of 114.778, or even higher. For more click on
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(Robert Fullem is a Reuters market analyst. The views expressed are his own.)
((robert.fullem@thomsonreuters.com;))
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