U.S. Dollar Index (DX) Futures Technical Analysis – In Position to Test Retracement Zone at 94.770 – 95.480

The U.S. Dollar is trading flat against a basket of currencies on Thursday after hitting its highest level since July 24 earlier in the session as it continued to edge towards a major retracement zone on the daily chart.

The safe-haven rally continued following another tech-driven sell-off on Wall Street and while concerns for the global economic recovery amid mounting coronavirus cases continued to weigh on sentiment.

At 07:44 GMT, December U.S. Dollar Index futures are trading 94.410, down 0.033 or -0.03%. This is down slightly from the intraday high of 94.560.

The greenback is being supported this week by a plunge in risk assets as tech stocks tumbled once again, with investors also spooked by uncertainty around the resurgence in coronavirus cases and prospects of further federal stimulus measures.

Although Federal Reserve policymakers on Wednesday vowed to keep interest rates near zero and retain an accommodative monetary policy stance for years, it also called for greater help from Congress.

Meanwhile, U.S. business activity slowed in September with manufacturing gains offset by a reversal in the services sector as the recovery appears to be losing momentum at the end of the third quarter.

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart. The uptrend was confirmed earlier in the session when buyers took out Wednesday’s high. A trade through 92.755 will change the main trend to down.

The main range is 97.785 to 91.750. Its retracement zone at 94.770 to 95.480 is the primary upside target. Aggressive counter-trend sellers could come in on the first test of this area.

The current minor range is 92.755 to 94.560. Its 50% level at 93.660 is a potential downside target. This level will move up as the index moves higher.

Daily Swing Chart Technical Forecast

The direction of the December U.S. Dollar Index on Thursday is likely to be determined by trader reaction to Thursday’s close at 94.445.

Bullish Scenario

A sustained move over 94.445 will indicate the presence of buyers. This could drive the index into the main 50% level at 94.770. Look for sellers on the initial test of this level. Overcoming it, however, could trigger an acceleration into the main Fibonacci level at 95.480.

Bearish Scenario

A sustained move under 94.445 will signal the presence of sellers. This would put the index in a position to post a potentially bearish closing price reversal top that could lead to the start of a 2 to 3 day correction.

The first downside target is the 50% level at 93.660, followed by a second 50% level at 93.155.

Side Notes

Thursday’s focus will shift to the latest jobless claims report from the Labor Department, due at 12:30 GMT, with economists polled by Reuters expecting new unemployment filings last week to come in at 840,000, down from 860,000 the previous week. Continuing claims are also expected to fall.

Fed Chairman Jerome Powell and Treasury Secretary Steven Mnuchin will resume testimony before Congress at 14:00 GMT, while August’s new home sales figures are published at the same time.

Keep an eye on the jobless claims report for any surprises that could create a volatile response by the U.S. Dollar.

For a look at all of today’s economic events, check out our economic calendar.

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.