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US Dollar Index (DX) Futures Technical Analysis – October 21, 2016 Forecast

By:
James Hyerczyk
Published: Oct 21, 2016, 12:13 UTC

December U.S. Dollar Index futures are trading higher on Friday, putting the index on course for its third consecutive week of gains. Today’s price action

us-dollar-index

December U.S. Dollar Index futures are trading higher on Friday, putting the index on course for its third consecutive week of gains. Today’s price action is being fueled by increasing expectations for a Fed rate hike in December.

According to the Fed Funds Indicator, investors are moving close to fully pricing in a rate hike before the end of the year. Currently, the indicator shows a 75 percent probability of a rate hike. This is up from 65 percent touched earlier in the week and last week’s 70 percent high.

After a setback earlier in the week, the dollar rally is back on track, following the recent debate that may have removed all doubt of a Clinton victory in November, hawkish comments from Fed member William Dudley.

The index posted a big jump on Thursday after steep drops in the Australian and New Zealand Dollars as well as the Euro. The single-currency weakened after the European Central Bank failed to convince investors that additional stimulus wasn’t forthcoming.

Technical Analysis

The main trend is up according to the daily swing chart. Earlier in the session, the index overcame the March 10 top at 98.375, putting it in a position to challenge the March 2 top at 98.79.

Today is going to be all about momentum and whether the index can sustain the rally through 98.375. This price is new support. A break back below will not change the trend, but it will indicate the selling is greater than the buying at current price levels.

Also the prolonged move in terms of price and time have put the index in the window of time for a closing price reversal top. Now that the market is trading above yesterday’s high, it has to close above yesterday’s close at 98.31 or a reversal top will form.

daily-december-u-s-dollar-index
Daily December U.S. Dollar Index

Forecast

Based on the current price at 98.515 and the earlier price action, the direction of the index the rest of the day will be determined by trader reaction to the old top at 98.375.

A sustained move over 98.375 will indicate the presence of buyers. This could generate enough upside momentum to trigger a move into 98.79.

A sustained move under 98.375 will signal the presence of sellers. This could lead to a quick break into yesterday’s close at 98.31, followed by a long-term angle at 98.14. This is also the trigger point for the start of a steep break into the swing bottom at 97.60 and another long-term downtrending angle at 97.49.

Watch the price action and read the order flow at 98.375 today. Trader reaction to this angle will set the tone of the market the rest of the session.

About the Author

James is a Florida-based technical analyst, market researcher, educator and trader with 35+ years of experience. He is an expert in the area of patterns, price and time analysis as it applies to futures, Forex, and stocks.

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