Daily March U.S. Dollar Index

US Dollar Index (DX) Futures Technical Analysis – January 9, 2014 Forecast

March U. S. Dollar Index futures are trading slightly lower ahead of today’s European Central Bank and Bank of England monetary policy announcements.

The ECB is expected to keep its benchmark interest rate at a historically low level; however, the focus will be on President Mario Draghi’s press conference. Some traders feel he may offer a dovish assessment of the economy. This could underpin the dollar while pressuring the Euro.

Traders expect the BoE to keep its benchmark interest rate unchanged as well as its current level of monetary stimulus. It may, however, change its guidance. The central bank guidance currently calls for a 7% unemployment rate before it would consider raising interest rates. Some speculators believe the BoE will raise this unemployment rate target. This would be bullish for the British Pound.

Yesterday’s stronger-than-expected ADP private sector jobs forecast helped boost the Greenback early in the session. The dollar was helped later in the session after the release of the Fed minutes which showed that a “majority” of voting members believed the benefits of bond purchases were declining over time. The minutes also showed that only a “few members” favored cutting the unemployment threshold for raising interest rates to 6%.

Besides the ECB and BoE announcements, traders will be influenced today by weekly U.S. jobless claims. This report is expected to show a slight decline in claims to 337K from 339K. Volume may be below average today because of Friday’s U.S. Non-Farm Payrolls report. The data is expected to show that 194K new jobs were added to the economy.

Daily March U.S. Dollar Index
Daily March U.S. Dollar Index

Technically, the main trend is up on the daily chart. The market remains in a relatively strong position, but may be overbought. This could make it ripe for a near-term correction. Early resistance is at 81.25 then the week high at 81.335.

Crossing to the weakside of an angle at 81.09 will put the index in a position to weaken further with another angle at 80.82 a potential downside target.

Traders should look for a tight trading range today unless the Bank of England surprises traders with a change in guidance. If it raises the unemployment threshold then look for the Pound to rally and the dollar to feel pressure. The longer-term view still supports a higher dollar since the Fed has begun to taper so a short-term sell-off will be welcomed by bullish investors.


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.

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