December U.S. Dollar Index futures are trading higher shortly before the regular session opening. The index rallied early in the session on increased demand for higher-yielding assets. The catalyst behind the move was an easing of concerns over the outcome of Tuesday’s U.S. presidential election after the FBI announced it was no longer investigating Democratic candidate Hillary Clinton.
There is still risk ahead of the election so I don’t expect to see a runaway market. If the rally resumes later today then it may extend into a short-term retracement zone.
The main trend is up according to the daily swing chart. The main trend will resume on a trade through 99.09. A new minor bottom was formed at 96.94. A trade through this bottom will turn the minor trend to down. Today’s price action suggests that momentum is shifting to the upside after an eight day setback.
The main range is 95.245 to 99.09. Its retracement zone at 97.17 to 96.71 is the primary downside target. This zone provided support last week when the index traded down to 96.94. A pair of uptrending angles passes through this zone at 97.01 and 96.93, making them a valid downside target also.
The short-term range is 99.09 to 96.94. Its retracement zone at 98.015 to 98.27 is the primary upside target. This zone is very important because sellers are going to try to stop the rally on a test of this zone in an effort to form a secondary lower top. Buyers are going to try to drive the market through this zone in an effort to make 96.94 a secondary higher bottom.
Based on the current price at 97.66 and the earlier price action, the nearest upside target is a downtrending angle at 97.97. This is followed by the short-term 50% level at 98.015, the short-term Fibonacci level at 98.27 and another downtrending angle at 98.53.
On the downside, the first support is the main 50% level at 97.17, and the pair of uptrending angles at 97.01 and 96.93.
There is no key level to watch. Today’s price action will be all about momentum. The direction of the stock market is likely to determine the strength and direction of the dollar index. If traders continue to demand risk then the index will rally. If fear reenters the picture because of the election then look for the index to break.