The US dollar has been king for some time, with March US Dollar Index futures (DX) hitting a short-term high of 100.7 on December 3. From that high it fell sharply to the December 15 swing low at 97.225. Over the last month the price has been climbing within a wedge pattern, managing to reach 99.95 on January 21. Since the short-term high sellers have taken over, and set up a bearish scenario for the dollar.
On January 28 the US dollar index accelerated to the downside and broke well below the wedge pattern. The height of the wedge (at the start) provides an approximate target for the decline. The wedge is 2.12 in height. Subtracted from the breakout price of 98.88 that gives a target of 96.76. There is little support in this region, so a decline to support around 94 isn't farfetched.
Figure 1. March US Dollar Index Futures, 4-hour Chart
Another factor also contributes to the bearishness in the US dollar index. The rising wedge high was unable to get close to the prior high for 100.7. The wedge created a lower high. A lower high is one of the necessary ingredients for a downtrend, which consists of lower price highs and lows.
On the flip side the price action has been choppier lately. If the price moves back into the wedge it could indicate we are in for more of this sideways movement around 99.