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Dollar Index Triangle: Trade the Breakout


The dollar index is in a strong uptrend, with the 4-hour chart showing only minor pullbacks over the last several months.  The latest pullback/slowdown has occurred in the form of a triangle since the 95.85 January 25 high.

Triangle resistance is between 95 and 95.23, so a breakout above that area indicates a continuation of the uptrend. The price target, based on the height of the larger triangle, is 97.29 to 97.69. A more conservative target is 96.99, based on the smaller triangle pattern.

Based on the uptrend, a move aggressive entry is to assume the uptrend will continue, and enter just above short-term triangle support (bottom of the pattern) near 94.30. In this way, if the price moves higher, but fails to breakout, a small profit can still be made.

Stop loss orders on the long trades are placed just below the most recent low at the time of the trade, or below the triangle low of 93.835.

Figure 1. March US Dollar Index Futures - 4-Hour Chart

dollarindex-1.jpg

The price could also break lower out of the triangle, indicating a deeper correction. Triangle support is between 94 and 93.835. If the price breaks below that, the target is 91.71 to 91.54 based on the triangle height. A more conservative target is 92.20.

 

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