DXY from the 103.24 close must cross 104.36 and 104.38 to travel higher to 105.33. Critical resistance points lie at 103.90, 104.07 then 104.36. Stiff resistance in the price path on the way higher are located from 103.71 to 103.78. Most important in the series is 103.90 because 103.82 is the monthly range top and viewed from Dec 3rd’s DXY V EUR/USD post.
Overall, DXY faces not only a vital break at 104.36 but a range top at 103.82. Higher for DXY at 103.82 and 104.36 places EUR/USD from the 1.0412 close at 103.54 and 1.0300. Why 1.0354 and 1.0300 is reliable as critical bottom levels is because both DXY and EUR/USD are moving together from daily pip range averages at 53 for EUR/USD and 52 for DXY. One pip higher for DXY translates to 1 pip lower for EUR/USD .
On the bottomside, critical break is located at 103.18 then the floodgates open to 102.65, 102.56, 102.21 and 102.12. The furthest bottoms are found on the Libor curve at 102.07 and 102.05. The base for DXY is built upon 101.18 and 99.63. At 102.65 places EUR/USD at 104.71. Only a break of 101.18 and 99.63 sets DXY on a sustained downtrend.
Overall range breaks are found at 105.33, 106.43 and 106.97. Above 106.97 then next comes 107.67.
Since October 11, the Fed no longer publishes Eurodollar rates therefore the USD Libor curve is the best alternative. Critical break point along this curve is located currently at 106.15. Overall, a break of above 104.36 and range point at 105.33 challenges 106.15. The commonalities in both curves is a vital break point at 103.71 and 103.74.
DXY is currently approaching not only critical levels and range tops but 104.36 is an important break to go higher.
Brian Twomey, Inside the Currency Market, btwomey.com