US Dollar Index (DX) Futures Technical Analysis – May 5, 2016 Forecast

June U.S. Dollar Index futures are trading higher for a third day, driven mostly by the weaker Japanese Yen. The yen weakened for a third day running on Thursday but was still close to a recent 18-month peak, with investors unconvinced by a signal from Japan’s prime minister that it could step in to weaken the currency.

Prime Minister Shinzo Abe said on Wednesday that Japan was watching the yen’s movements and would act if necessary but market players generally believe the intervention bar is high.

Technically, the main trend is down according to the daily swing chart. However, momentum has shifted to the upside since the formation of a potentially bullish closing price reversal bottom on Tuesday.

The main range is 95.18 to 91.88. Its retracement zone at 93.53 to 93.92 is the primary upside target. This zone is currently being tested. Since the trend is down, sellers may start to come in on a test of this zone. They may be profit-takers or new short-sellers.

Based on the current price at 93.63, the direction of the market the rest of the session is likely to be determined by trader reaction to the 50% level at 93.53.

A sustained move over 93.53 will indicate the presence of buyers. They may create enough upside momentum to drive the market into a Fib level at 93.92 and a downtrending angle at 94.06.

The inability to hold above 93.92 will signal the presence of sellers. The daily chart is open to the downside with the next target the steep uptrending angle at 92.88.

Watch the price action and read the order flow at 93.53 the rest of the session. Trader reaction to this will tell us if the buying is getting stronger or if the sellers are starting to regain control.