US Dollar Index (DX) Futures Technical Analysis – May 31, 2016 Forecast

June U.S. Dollar Index futures finished higher on Friday, getting a boost from somewhat hawkish comments by Fed Chair Janet Yellen late in the session. On Monday, the market was closed due to the U.S. Memorial Day holiday.

Today begins U.S. Non-Farm Payrolls report week with the data due to be released on Friday. The trade could go either way this week because of the uncertainty about the timing of the next Fed rate hike going into the report.

Traders will get a little more clarity about whether the Fed will raise rates in June or July as currently speculated after the release of the report.

Technically, the main trend is up according to the daily swing chart, however, upside momentum has slowed considerably since reaching a major retracement zone.

The main range is 98.70 to 91.88. Its retracement zone is 95.29 to 96.095. The market has been trading inside this zone for seven sessions without advancing very much in either direction. The key number to watch is 95.29. This lower, or 50% level has been straddled the last seven days so it is definitely influencing the direction of the index.

Based on Friday’s close at 95.50, the direction of the market today will likely be determined by trader reaction to the 50% level at 95.29.

A sustained move over 95.29 will signal the presence of buyers. This could create enough upside momentum to fuel a strong rally into the Fibonacci level at 96.095. Taking out this level will indicate the buying is getting stronger with potential targets at 96.63 and 96.73.

A sustained move under 95.29 will indicate the presence of sellers. This could trigger an acceleration into the long-term downtrending angle at 94.76. Crossing to the weak side of this angle will put the index in a bearish position with the next major target an uptrending angle at 94.26.

Watch the price action and read the order flow at 95.29 today. Trader reaction to this level will tell us if the buying is increasing or if sellers are taking control.