December U.S. Dollar Index futures are trading slightly lower and in a narrow range early Tuesday. The index is also inside Monday’s range that could be an indication of investor indecision and impending volatility. It could also be an indication that the market is going through a transition period.
The U.S. economic data schedule is soft today with only one major report – Conference Board Consumer Confidence – due to be released at 1400 GMT. It is expected to come in at 101.5, down from the previous 104.1. This report could cause some volatility in the market, but it is not likely to influence the Fed’s interest rate decision. If it does come in lower than expected then this will likely reflect worries over the damage caused by Hurricane Matthew and the November election.
There are no Fed members scheduled to speak today because of the lockdown period ahead of next week’s FOMC meeting so investors are likely to reaction to the movement in the U.S. Treasury yields. We could see some selling pressure as investors prepare for Wednesday’s Australian CPI report and the U.S. Durable Goods report. The major market moving report this week will be Friday’s Advanced GDP.
The main trend is up according to the daily swing chart. Yesterday, the index took out the March 2 top at 98.79, only to stop at .98.825. Today, it is trading below both numbers, suggesting the selling may be greater than the buying at current price levels.
If buyers return and create enough upside momentum then the psychological 99.00 level will become the next upside target.
Taking out yesterday’s low at 98.54 could trigger some sell stops.
The short-term range is 97.60 to 98.825. If 98.54 is taken out with conviction then we could see a move into its retracement zone at 98.21 to 98.07.
We could see a technical bounce on the first test of this area, but if it fails then 97.60 becomes the next downside target.
Based on yesterday’s close at 98.73 and the early price action, the direction of the market today is likely to be determined by trader reaction to yesterday’s high at 98.825.
A sustained move over this price will signal the presence of buyers. However, since the index is in the window of time for a closing price reversal top, you have to watch for signs of selling pressure and be willing to flip your position if a breakout rally fails.
A sustained move under 98.825 will indicate the presence of sellers. The daily chart indicates the market has a clear shot at 98.21 to 98.07 if the selling pressure is strong enough. This is the minimum downside target today.
If 98.07 is taken out with conviction then the break could extend into 97.60 to 97.50.