A spike by the 30-year U.S. Treasury Bond yield to 3% early in the session helped drive the December U.S. Dollar Index futures contract into its highest level since January 21. The rise in the U.S. Treasury Bond yield represents a reaction to president-elect Donald Trump’s plan to rebuild America through fiscal spending. The price action indicates that the market is betting that his plan will be inflationary. The higher Treasury yields are making the U.S. Dollar a more attractive investment.
The main trend is up according to the daily swing chart. The first target was the January 21 main top at 100.01. This level was tested earlier today. The price action suggests that sellers were waiting for this move because they came in strong to drive the market back to 99.765.
Not only is 100.01 resistance, but it is also the trigger point for an acceleration to the upside with the next major target coming in at 100.77. This is the December 3, 2015 main top. It was put in about a week before the Fed hiked rates last year.
Based on the current price at 99.765 and the earlier price action, the direction of the market today is likely to be determined by trader reaction to the intraday high at 100.04.
A sustained move over 100.04 will indicate the presence of buyers. If buyers continue to come and the momentum increases substantially then look for the rally to extend into 100.77.
A sustained move under 100.04 will signal the presence of sellers. The daily chart is open to the downside with the nearest support angle coming in at 98.91. This angle is moving up at a rate of 1.00 per day from the 95.905 main bottom. It moves up to 99.91 on Tuesday. A close below this price on Monday will put the index in a weak position on the opening on Tuesday.
Watch the price action and read the order flow at 100.04 later today. Trader reaction to this level will tell us if the buying is getting stronger or if sellers are starting to come in.
Also watch 99.91 on the close. A finish below this angle will tell us that momentum is shifting to the downside. This could lead to a lower opening on Tuesday.