US Dollar Index

U.S. Dollar Index (DX) Futures Technical Analysis – Looking for Euro Driven Volatility on Monday

The U.S. Dollar was broadly lower against a basket of major currencies on Friday with the weakness driven mostly by a stronger Euro, which rose to just under a four-month high. The single-currency was supported by speculation that European Union (EU) leaders would reach an agreement on a recovery fund that could lift the bloc out of the current recession.

On Friday, September U.S. Dollar Index futures are trading 95.889, down 0.430 or -0.45%.

The 27 EU heads are struggling to reach consensus on the 2021-27 budget, proposed at above 1 trillion Euros, and a linked new recovery fund worth 750 billion Euros, meant to help rebuild southern economies most affected by the pandemic.

Daily September U.S. Dollar Index

Daily Swing Chart Technical Analysis

Main Trend Technical Analysis

The main trend is down according to the daily swing chart. A trade through 95.720 will signal a resumption of the downtrend. This should lead to a test of the next main bottom at 95.570. Taking out this main bottom will reaffirm the downtrend. This could create the downside momentum needed to challenge the March 9 bottom at 94.671.

The main trend will change to up on a move through 97.810. This is highly unlikely, however, due to the prolonged move down in terms of price and time, the index will begin Monday’s session inside the window of time for a potentially bullish closing price reversal bottom.

Minor Trend Technical Analysis

The minor trend is also down according to the daily swing chart. A trade through the minor bottom at 95.720 will reaffirm the minor trend. The minor trend will change to up on a trade through 96.670. The trigger point for a potential acceleration to the upside, however, is the next minor top at 96.960.

Retracement Level Analysis

The short-term range is 95.570 to 97.810. Its 50% level at 96.690 is potential resistance.

The intermediate range is 99.885 to 95.570. If the minor trend changes to up then look for a potential rally into its retracement zone at 97.730 to 98.240 over the near-term.

Short-Term Outlook

Traders are saying that a positive outcome of the negotiations at the EU summit could potentially be the Euro’s ticket to fresh highs for the year. Since the Euro represents about 57% of the dollar index, this could send the September U.S. Dollar Index sharply lower.

If progress is made, the Euro could break through the technically significant 1.15 level, which has not been touched since February 2019. Conversely, the dollar index could plunge into the March 9 bottom at 94.671.

If EU policymakers can’t make a decision and push it into August then the dollar index could rise since this action would encourage Euro traders to trim their bullish positions.

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.