Trade idea: short dollar basket
There is an inverted pennant pattern developing on the dollar basket or dollar index (DXY).
As IGTV’s Jeremy Naylor explains it’s a fairly easy set up and with a close stop loss just over the descending line of resistance there’s the insurance to mitigate any potential losses. Should the trade work out, there’s money to be made short all the way down to 100.60.
(AI Video Transcript)
The euro-dollar trade
The EUR/USD trade is a big part of this. The author sees a pattern forming on the dollar basket that looks like a triangle, which usually means the pattern will continue. The triangle touches the lines of resistance and support. The author thinks that if the pattern continues as expected, the dollar could drop to levels it hasn't been at since July. This makes sense because there is a possibility that the Federal Reserve will lower interest rates, which is a reason for people to sell the dollar.
The dollar basket
To make this trade, the author suggests putting a stop loss above the falling line of resistance, which is around 102.25. The current price is 102.07. The author sets a goal for the price at 162, assuming the pattern continues like it should. But if the pattern doesn't continue and there is a reversal, the stop loss will kick in and the trade will be over. If the dollar does drop like expected, the potential profit would be at 100.62.
Overall, the video presents a trade idea based on a pattern forming on the USD basket. The idea is that the dollar will go down more because the Federal Reserve might lower interest rates. The success of the trade depends on whether the expected drop actually happens or if there is a reversal instead.
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