US Dollar Index (DX) Futures Technical Analysis – July 25, 2016 Forecast

September U.S. Dollar Index futures are trading slightly lower on Monday. Profit-taking after last week’s surge and position-squaring ahead of this week’s U.S. Federal Reserve monetary policy announcement on July 27 and the Bank of Japan’s monetary policy announcement on July 29 are likely behind the weakness.

The Fed is expected to stand pat on monetary policy with investors looking at the statement for any hint of a near-term rate hike. The Bank of Japan is expected to ease monetary policy further.

Technically, the main trend is up according to the daily swing chart.  The market is in no position to turn the main trend to down, but we could see a closing price reversal top today which could lead to a 2 to 3 day correction.

The main range was formed by the November 27, 2015 top at 100.95 and the May 3, 2016 bottom at 92.00. Its retracement zone is 96.47 to 97.53. The index is currently straddling the upper or Fibonacci level at 97.53. Trader reaction to this zone will likely determine the longer-term direction of the U.S Dollar.

Based on Friday’s close at 97.52 and the earlier price action, the direction of the market today is likely to be determined by trader reaction to the steep uptrending angle at 97.59.

A sustained move over 97.59 will put the index in a bullish position. If buyers get behind the move, we could see a surge to the upside with the next target a long-term downtrending angle at 98.31. This is followed by the March 10 top at 98.50.

A sustained move under 97.59 will signal the presence of sellers. This should lead to a quick test of the major Fibonacci level at 97.53.

The Fib level is the trigger point for an acceleration to the downside with the next potential target an uptrending angle at 96.72.

Look for a downside bias as long as the September U.S. Dollar Index remains below the Fib at 97.53. Look for an upside bias on a sustained move over 97.59.