Following the run higher in the US Dollar Index (USD) this month, price action has ventured into a key monthly resistance area between 107.39 and 105.91. Whether this is sufficient to hinder current outperformance in the USD is difficult to estimate at this juncture. However, from a technical analyst’s point of view, it is undeniable that there is much wood to chop through overhead.

Bollinger Bands and RSI Converging with Monthly Resistance

Buyers and sellers are battling for position around the upper Bollinger Band at 106.53 (set to three standard deviations [default is two standard deviations]), which merges with the said monthly resistance zone. This underscores the possibility of a mean reversion play as far south as the 20-day Simple Moving Average (SMA) at 104.40, the central Bollinger Band. In addition to this, the Relative Strength Index (RSI) recently recorded overbought conditions and could establish negative divergence.

Price Direction?

While monthly resistance and the current position of the Bollinger Bands and the RSI suggest a downside move, the 200-day SMA at 103.88 and Ichimoku support are nearby: the area between the Conversion Line (blue) and the Base Line (red) at 104.79 and 104.33, respectively.

With active higher-timeframe resistance and two key technical indicators suggesting a bearish scenario, profit-taking could be seen until the 200-day SMA enters the fray. At that point, this could deliver a technical floor for dip-buyers to enter long from in line with current market sentiment.

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