US Dollar Index

U.S. Dollar Index (DX) Futures Technical Analysis – Strengthens Over 105.470, Weakens Under 105.155

The U.S. Dollar is trading lower against a basket of major currencies on Monday after hitting its lowest level since July 5 earlier in the session. The price action suggests investors are ramping up bets that aggressive Federal Reserve monetary policy would tip the economy into a recession.

The selling pressure began last Wednesday, shortly after the Fed announced a 75 basis point rate hike as widely expected. Dovishly-perceived comments from Fed Chairman Jerome Powell also contributed to the weakness. The selling pressure intensified on Thursday and into the weekend after the latest U.S. Gross Domestic Product (GDP) report showed a second-quarter contraction.

At 13:05 GMT, September U.S. Dollar Index futures are trading 105.480, down 0.299 or -0.28%. On Friday, the Invesco DB US Dollar Index Bullish Fund ETF (UUP) settled at $28.30, down $0.10 or -0.37%.

US Manufacturing PMI Report Could Set the Tone

Today’s U.S. Manufacturing PMI report, due to be released at 14:00 GMT, is expected to show a dip from 53.0 to 52.3.

A report that shows activity slowed more than expected in July will serve as another sign that the economy was cooling amid aggressive monetary policy tightening by the Federal Reserve. This would put pressure on Treasury yields and the U.S. Dollar against its peers.

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

The minor trend is down. This is controlling the momentum. A trade through 107.300 will change the minor trend to up.

The intermediate range is 101.170 to 109.140. Its retracement zone at 105.155 to 104.215 is the primary downside target zone.

The short-term range is 103.200 to 109.140. The market is currently trading on the weak side of its retracement zone at 105.470 to 106.170, making it resistance.

The combination of the two zones makes 105.155 to 105.470 an important area to watch for potential support.

Daily Swing Chart Technical Forecast

Trader reaction to 105.470 and 105.155 is likely to determine the direction of the September U.S. Dollar Index on Monday.

Bullish Scenario

A sustained move over 105.470 will indicate the presence of buyers. If this creates enough upside momentum then look for the rally to possibly extend into the 50% level at 106.170.

Bearish Scenario

A sustained move under 105.155 will signal the presence of sellers. This is a potential trigger point for an acceleration into the intermediate Fibonacci level at 104.215.

Side Notes

Following the prolonged move down, a close over 105.780 will form a potentially bullish closing price reversal bottom. If confirmed, this could trigger the start of a 2 to 3 day rally.

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.