With EURUSD breaking above 1.25 today, USDJPY breaking below 117 and GBPUSD challenging the long-term resistance trend line at 1.5750-1.58, the Dollar is at an important junction regarding the trend over the next weeks.
The main component of the Dollar index is the EURUSD fx pair. Current upward move to 1.2569 has reached the first important short-term resistance where the Ichimoku cloud is found. According to wave theory we can be very confident that the decline from 1.40 could be complete and an upward corrective bounce should be epxected towards the 38% retracement at least. Important support is found at 1.24 and only a break below that level could signal a fake break out.
The USDJPY has made a strong reversal at 121.50 and by breaking below 117 has given a sell signal with target between 112-114. The strong upward move from the past July can very well be complete and we are entering a downward corrective period that should eventually reach the 38% retracement at least.
The GBPUSD pair is also near important long-term resistance levels that if broken will confirm that the downward move from 1.7150 is over and an upward correction is under way. The resistance at 1.5750-1.58 is critical and if broken will confirm that the Pound should see some more upside relative to the Dollar maybe towards 1.59-1.61.
The Dollar is showing signs of weakness and this should not be taken lightly. The rally has been impressive in the Dollar index from 79.75 to 89-90. The last weekly candle was the first warning. This week we get another warning as it breaks support at 87.90. Falling below 87 will only confirm the reversal of the trend and the start of a deeper correction that could bring the index back at 85.50.
The 38% retracement of the rise from 79.75 is at 85.50. This is the first target. If and when we reach at that levels, I believe the Dollar will again be a very good buy opportunity.