Following a downtrend which lasted the last half of 2013, through 2014 the US Dollar (DX) has been trading within a range. At the end of the July the price broke above prior highs of the range, but then quickly pulled back. August 5th and 6th have seen new highs posted yet again, indicating there is still buying interest here.
Figure 1. Dollar Index Futures (DX) Daily Chart
If the upside breakout is legitimate, it shifts the long-term trend in the U.S. dollar to up, with a target near 2013 highs between 84.5 and 85. The problem with buying the breakout is where to place a stop loss following such a strong run higher in July. Also, there is not enough confirmation yet that the breakout is actually legitimate.
Sit back at this area, and see if upward momentum continues. If it does, then buy when the price pulls back toward old resistance (current price area). That trade setup provides a better reward for risk, since there is more evidence of the uptrend, a stop can be placed below the old resistance and the upside potential is still there.
Even if the breakout pulls back from here, support is likely to come in near 80.50 as two trendlines converge. There is an old broken one--which is often still usable the next time the price comes back to it after breaking it-- and the current short-term uptrend. If that trade occurs (requires a failed breakout here), then the price will still need to climb above the resistance area to initiate the uptrend, otherwise the range will continue.
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