US Dollar Index

U.S. Dollar Index (DX) Futures Technical Analysis – Shift in Momentum Could Lead to Test of 94.900

The U.S. Dollar is trading higher against a basket of major currencies early Tuesday after hitting two-year low the previous session. The move is likely being fueled by position-squaring and profit-taking ahead of a Federal Reserve meeting and as political wrangling over the next U.S. fiscal rescue package moved closer to conclusion.

At 05:38 GMT, September U.S. Dollar Index futures are trading 93.815, up 0.200 or +0.21%.

On the horizon is a Fed meeting that begins later on Tuesday and Friday’s deadline for U.S. Congress to extend unemployment benefits.

No policy change is anticipated at the Fed meeting on Wednesday, but investors expect to hear its super-easy outlook reaffirmed and are speculating about a change in emphasis in the forward guidance.

The big U.S. fiscal package is currently deadlocked in negotiations between Democrats, who have made a $3 trillion proposal, and Republicans who have tabled a more modest $1 trillion plan. The dollar could bounce back if the bill passes in a timely manner.

Daily September U.S. Dollar Index

Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart. A trade through 93.420 will signal a resumption of the downtrend. The main trend will change to up on a trade through 97.810.

This is highly unlikely, but due to the prolonged move down in terms of price and time, traders should watch for a closing price reversal bottom. This won’t change the trend to up, but it could lead to a 2 to 3 day counter-trend rally.

The minor trend is also down. A trade through 96.380 will change the minor trend to up. This will also shift the momentum to up.

Any change in direction at current levels will be to alleviate the downside pressure. I don’t see a change in the minor or main trend in the near future. One clue that the trend may be getting ready to turn up will be the formation of a “W” bottom.

The minor range is 96.380 to 93.420. Its retracement zone at 94.900 to 95.250 is the nearest retracement zone target.

Daily Swing Chart Technical Analysis

Bearish Scenario

A trade through 93.420 will signal a resumption of the downtrend. This could create the downside momentum needed to drive the market into a pair of main bottoms at 92.820 and 92.580.

Bullish Scenario

Holding 93.420 will indicate the presence of buyers. If this can create enough upside momentum this week then look for a short-covering rally into 94.900 to 95.250. Since the main trend is down, sellers are likely to come in on a test of this zone.

Side Notes

Taking out 93.420 then closing higher for the session will form a daily closing price reversal bottom. If confirmed, this could trigger a 2 to 3 day rally into at least 94.900.

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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.