March U.S. Dollar Index futures are expected to trade flat on Tuesday based on the early trade. Volume is extremely light with the major institutions still on the sidelines. This should help keep the volatility down, however, there is still the possibility of a volatility spike. They’re hard to predict and tend to just happen. The key to trading the market today is to avoid getting trapped by false breakouts.
The main trend is up according to the daily swing chart. A trade through 103.625 will signal a resumption of the uptrend. A trade through 102.59 will turn momentum to down, but not the trend. The trend will only turn down on a trade through 100.635.
The short-term range is 103.625 to 102.59. Its retracement zone at 103.108 to 103.230 is acting like resistance. The short-term direction of the index will be determined by trader reaction to this zone.
The main range is 100.635 to 103.625. If there is selling pressure then its retracement zone at 102.130 to 101.777 will become the primary downside target.
Based on the early price action and the current price at 103.025, the direction of the index today is likely to be determined by trader reaction to the resistance cluster at 103.108 to 103.125.
A sustained move under 103.108 will indicate the presence of sellers. There is room to the downside, but the market is not likely to break very far without selling volume behind it. If there is a break then look for a drive into the uptrending angle at 102.635, followed closely by the minor bottom at 102.59.
Overtaking 103.125 will signal the presence of buyers. This could trigger a fast move into 103.23. This is followed by a downtrending angle at 103.375. This is the last potential resistance angle before the 103.625 main top.
Watch the price action and read the order flow at 103.108 to 113.230 today. Look for an upside bias to develop on a move over 113.230 and a downside bias on a sustained move under 103.108. Don’t expect a big range today because of the low volume.