September U.S. Dollar Index futures rallied on Monday after a key Federal Reserve Index of business conditions rose to a three-year high. This helped drive Treasury yields higher, making the U.S. Dollar a more attractive investment. It also raised expectations for a Fed rate hike in December.
The New York Fed’s Empire State Index came in at 30.2 in October, its highest since September 2014, soundly beating the forecast of 20.7.
The report also helped drive up expectations of a third rate increase this year to about 90 percent, up from about 50 percent a month ago.
Daily Technical Analysis
The main trend is up according to the daily swing chart. The price action suggests the market successfully completed the objective of the closing price reversal top at 94.100 from October 6.
On Friday, the market formed a closing price reversal bottom at 92.590. Monday’s price action confirmed this chart pattern. A trade through 92.590 will negate the chart pattern and reaffirm the downtrend.
The major 50% level comes in at 92.90. Closing over this long-term level is giving the market an upside bias.
The main range is 91.215 to 94.100. Its retracement zone is 92.66 to 92.32.
Another main range is 90.795 to 94.100. It retracement zone is 92.45 to 92.06.
Combining the two retracement zones creates a key support area at 92.66 to 92.45. Friday’s closing price reversal bottom at 92.590 was formed inside this area.
The new short-term range is 94.100 to 92.590. Look for a rally into its retracement zone at 93.345 to 93.52. This zone is very important to the structure of the chart pattern. Aggressive counter-trend sellers are going to try to stop the rally on a test of this zone in an effort to form a secondary lower top.
Bullish trend traders are going to try to take out the retracement zone as they try to establish 92.59 as an important secondary higher bottom.
Watch for a rally into 93.345 to 93.52 on Tuesday. Volume should pick up on a test of this zone as sellers and buyers battle it out for control.