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US Dollar Index (DX) Futures Technical Analysis – October 24, 2016 Forecast

By:
James Hyerczyk

December U.S. Dollar Index futures are trading lower after taking out the March 2 top at 98.79. The current price action suggests the selling may be

us-dollar-index

December U.S. Dollar Index futures are trading lower after taking out the March 2 top at 98.79. The current price action suggests the selling may be greater than the buying at current price levels.

The initial rally was generated by increased expectations of a Fed rate hike in December. This notion was supported by comments on Friday by San Francisco Fed President John Williams who said that “it makes sense to get back to a pace of gradual rate increases, preferably sooner rather than later.” Earlier in the week, similar comments were voiced by New York Fed President William Dudley and Fed Vice Chair Stanley Fischer.

Dudley will be at it again today at 1300 GMT along with St. Louis Fed President James Bullard at 1305 GMT. Both are noted hawks so investors expect to hear more support for a rate hike.

Technical Analysis

The main trend is up according to the daily swing chart. However, momentum may be shifting to the downside, based on the early price action. We had a higher-high early in the session. Now all we need is a lower close and we will have a potentially bearish closing price reversal top chart pattern. This could trigger the start of a 2 to 3 day correction.

The short-term range is 97.60 to 98.825. Its retracement zone at 98.21 to 98.07 is the first downside target.

On the upside, the next major target is the psychological 99.00 level.

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

Forecast

Based on the current price at 98.605, the direction of the index the rest of the session is likely to be determined by trader reaction to Friday’s close at 98.69.

Overcoming 98.69 will indicate that buyers have returned. This may generate enough intraday momentum to trigger a rally into 98.825.

A sustained move under 98.69 will indicate that the selling is getting stronger. This could drive the market into the minor 50% level at 98.21, followed by 98.07.

The daily chart could open up to the downside if 98.07 fails as support because the next major target is the uptrending angle at 97.37.

Watch the price action and read the order flow at 98.69. Trader reaction to this level will set the tone for the rest of the day.

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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