US Dollar Index

U.S. Dollar Index (DX) Futures Technical Analysis – Giving Up Gains as Recession Fears Ease

The U.S. Dollar is trading lower against a basket of major currencies late Friday after erasing all of its earlier gains. The catalyst behind the selling pressure is a stronger-than-expected U.S. Non-Farm Payrolls report for June.

Although the report did nothing to reduce the chances of more aggressive interest rate hikes by the Federal Reserve, it did ease worries about the strength of the economy. This encouraged traders who bought the dollar for safe-haven protection to liquidate those positions, driving the greenback lower.

At 19:00 GMT, September U.S. Dollar Index futures are trading 106.815, down 0.144 or -0.13%. The Invesco DB US Dollar Index Bullish Fund ETF (UUP) is at $28.57, down $0.02 or -0.07%.

In economic news, the June employment report showed jobs growing at a faster clip than expected. Non-Farm payrolls increased 372,000 last month, according to the Bureau of Labor Statistics. Economists predicted the U.S. economy would add 260,000 jobs, according to Dow Jones. The unemployment rate was 3.6%, which was unchanged from May.

I don’t think there is anything in this report to persuade the Fed from raising rates 75-basis points at its July 27 meeting.

Daily September U.S. Dollar Index

Short-Term Outlook

Trader reaction to 106.959 is likely to determine the direction of the September U.S. Dollar Index into the close on Friday.

Bullish Scenario

A sustained move over 106.959 will indicate the presence of buyers. If this creates enough upside momentum then look for a retest of the intraday high at 107.615. A move through this level could extend the intraday rally into the long-term Fibonacci level at 107.780.

Bearish Scenario

A sustained move under 106.959 will signal the presence of sellers. A trade through the intraday low at 106.640 will indicate the selling pressure is getting stronger.

A close under 106.959 will form a potentially bearish closing price reversal top. If confirmed, this could trigger the start of a 2 to 3 day correction.

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.