US Dollar Index

U.S. Dollar Index (DX) Futures Technical Analysis – Boosted Amid Recession Fears, Disappointing Economic Data

The U.S. Dollar jumped against a basket of major currencies on Friday, edging closer to a 20-year high reached on June 15. The move was fueled by safe-haven buying, amid recession fears and disappointing economic data.

Investors sought protection in U.S. Treasury bonds, the Japanese Yen and the U.S. Dollar after the ISM manufacturing index came in at 53, slightly below a Dow Jones estimate of 54.3.

The news came in on top of a government report released on Thursday that showed the core personal consumption expenditures price index, the Fed’s preferred inflation measure, rose 4.7% in May. The number came in 0.2 percentage points below last month’s figure, but still around levels not seen in over 40 years. The PCE index was expected to show a year-over-year increase of 4.8% for May, according to Dow Jones.

On Friday, the September U.S. Dollar Index settled at 104.909, up 0.4450 or +0.42%. The Invesco DB US Dollar Index Bullish Fund ETF (UUP) finished at $28.07, up $0.11 or +0.38%.

Daily September U.S. Dollar Index

Short-Term Outlook

Traders will be watching U.S. economic data over the near-term. The Federal Reserve will be using these results to decide the course of monetary policy at its July 26-27 meeting. The key data ahead of the meeting are U.S. Non-Farm Payrolls on July 8 and the Consumer Price Index (CPI) on July 13.

Trader reaction to 104.910 is likely to determine the direction of the September U.S. Dollar Index early Monday. However, traders are expecting volume to be extremely light because of a U.S. bank holiday.

Bullish Scenario

A sustained move over 104.910 will indicate the presence of buyers. Taking out Friday’s high at 105.440 will indicate the buying is getting stronger. This could trigger an acceleration to the upside with the main top at 105.475 the next key target.

Taking out 105.475 will reaffirm the uptrend. If the buying volume is strong enough, we could see an acceleration to the upside with the long-term Fibonacci level at 107.780 the next major target.

Bearish Scenario

A sustained move under 104.910 will signal the presence of sellers. If this produces enough downside momentum then look for a test of the pivot at 104.340.

Buyers could come in on the first test of 104.340, but if it fails then look for the selling pressure to possibly extend into a support cluster at 103.325 – 103.200.

For a look at all of today’s economic events, check out our economic calendar.

Published by

James Hyerczyk

James A. Hyerczyk has worked as a fundamental and technical financial market analyst since 1982. His technical work features the pattern, price and time analysis techniques of W.D. Gann.