U.S. Dollar Index (DX) Futures Technical Analysis – Trade Through 97.05 Confirms Closing Price Reversal Bottom

The U.S. Dollar is trading higher against a basket of major currencies on Monday after producing a potentially bullish closing price reversal bottom the previous session. After trading lower for 15 sessions since its last main top on May 14, the index made a strong reversal to the upside following the release of stronger-than-expected U.S. employment data.

At 07:22 GMT, June U.S. Dollar Index futures are trading 96.895, down 0.027 or -0.03%.

The robust jobs report drove U.S. Treasury yields higher, making the dollar a more attractive assets. Helping to support the greenback the most was a drop in the Euro. The single-currency had been supported for weeks on speculation of more stimulus. The European Central Bank delivered more stimulus than expected last Thursday, spiking the Euro higher.

Now that the stimulus news is out of the way, U.S. Dollar traders are likely to shift their focus to the U.S. Federal Reserve interest rate and monetary policy decisions on Wednesday. This could set the tone for the rest of the week.

Traders expect the Fed to leave interest rates unchanged, but it could throw some water on the bullish outlook driving demand for higher risk assets. If the Fed saws anything bearish about the economic recovery, stocks could drop and investors could move money back into the safe-haven U.S. Dollar.

Daily June U.S. Dollar Index

Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart. The trend isn’t close to turning higher, but Friday’s closing price reversal bottom suggests momentum may be getting ready to shift to the upside.

A trade through 97.050 will confirm the closing price reversal bottom. This could trigger the start of a 2 to 3 day counter-trend rally.

A move through 96.430 will negate the closing price reversal bottom. This would also signal a resumption of the downtrend.

The main range is 94.530 to 103.960. Its retracement zone at 98.130 to 99.245 is controlling the longer-term direction of the index. This is resistance.

The short-term range is 100.605 to 96.430. Its 50% level at 98.520 is additional resistance and a potential upside target.

Daily Swing Chart Technical Forecast

Based on Friday’s chart pattern, the direction of the June U.S. Dollar Index on Monday is likely to be determined by trader reaction to 97.050 and 96.430.

Bullish Scenario

Taking out 97.050 will confirm the closing price reversal bottom. A sustained move over this level will indicate the buying is getting stronger. This could trigger the start of a 2 to 3 day counter-trend rally with 98.130 and 98.520 the next potential upside targets.

Bearish Scenario

Taking out 96.430 will reaffirm the downtrend. If this creates enough downside momentum then look for the selling to eventually extend into the March 9 main bottom at 94.530.

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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.