US Dollar Index

U.S. Dollar Index (DX) Futures Technical Analysis – Bulls Hoping for Break into 105.470 – 105.155 Value Zone

The U.S. Dollar is trading lower against a basket of major currencies on Monday as traders position-themselves ahead of the start of the Federal Reserve’s two-day monetary policy meeting.

The dollar is being pressured by a stronger Euro and safe-haven liquidation amid improving risk sentiment. However, gains are likely being limited by slightly higher U.S. Treasury yields.

At 12:21 GMT, September U.S. Dollar Index futures are trading 106.225, down 0.396 or -0.37%. On Friday, the Invesco DB US Dollar Index Bullish Fund ETF (UUP) settled at $28.48, down $0.04 or -0.16%.

Traders Bracing for Federal Reserve Interest Rate Decision

This week’s focus will be on the U.S. Federal Reserve’s two-day policy meeting, concluding on Wednesday, with economists broadly expecting a 75 basis point hike to interest rates.

The Fed is attempting to reel in inflation while navigating a backdrop of slowing growth, as evidenced by a slew of weaker-than-expected data on business activity and jobs published last week.

Treasury Secretary Janet Yellen told NBC on Sunday that while there are signs that the U.S. economy is at risk of recession, a downturn is not inevitable.

Daily September U.S. Dollar Index

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart. However, momentum is trending lower.

A trade through 109.140 will signal a resumption of the uptrend. A move through 103.200 will change the main trend to down.

The minor trend is down. This is controlling the momentum. A trade through 105.990 will reaffirm the downtrend. A move through 107.250 will change the minor trend to up.

The short-term range is 103.200 to 109.140. The index is currently testing its retracement zone at 106.170 to 105.470.

The main range is 101.170 to 109.140. Its retracement zone at 105.155 to 104.215 is the major support.

The two retracement zones combine to form a support cluster at 105.470 to 105.155. Since the main trend is up, buyers are likely to come in on a test of this zone.

On the upside, the major resistance is a long-term Fibonacci level at 107.780.

Daily Swing Chart Technical Forecast

Trader reaction to the short-term 50% level at 106.170 is likely to determine the direction of the September U.S. Dollar Index on Monday.

Bullish Scenario

A sustained move over 106.170 will indicate the presence of buyers. The first upside target is a minor pivot at 106.620. Overtaking this level could drive the index into the minor top at 107.250.

Bearish Scenario

A sustained move under 106.170 will signal the presence of sellers. Taking out last week’s low at 105.990 could trigger an acceleration into the support cluster at 105.470 to 105.155.

Since the main trend is up, watch for buyers to come in on a test of 105.470 to 105.155. If the latter fails to hold then look for the selling to possibly extend into the main Fibonacci level at 104.215. This is the last major support level before the 103.200 main bottom.

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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.