US Dollar Index (DX) Futures Technical Analysis – October 3, 2016 Forecast

December U.S. Dollar Index futures are trading higher, but inside Friday’s wide range which suggests investor indecision and impending volatility. This week is Non-Farm Payrolls week so we could see a drop-off in volume and volatility.

Other than Friday’s wide range which was fueled by the surprise Deutsche Bank event, traders have been content with holding the dollar in a range. We may revert back to that type of trade until after the release of the jobs data on Friday.

On tap in the U.S. today is the major ISM Manufacturing PMI report. The last read was 49.4. It came in below 50.0 which means it was in contraction. This month investors are predicting a read of 50.4. It’s important that this number regain the expansion/contraction level. Continuing to remain below 50.0 will indicate a bearish trend is developing this could reduce the chances of a rate hike.

Other minor reports include:  Final Manufacturing PMI and Construction Spending.

TECHNICAL ANALYSIS

The main trend is down according to the daily swing chart. However, the direction of the index since September 21 has been sideways to lower at best. The minor trend is up.

The main range is 94.385 to 96.305. Its retracement zone at 95.345 to 95.12 is the primary downside target. This zone has been providing support since September 22.

The short-term range is 96.305 to 94.95. Its retracement zone at 95.63 to 95.79 is the primary upside target. This zone has acted like resistance for about two weeks.

Since the index essentially became rangebound shortly after the last Fed interest rate decision and monetary policy statement, the index is likely to sit in a range until Friday when investors will get more information as to the timing of the next Fed rate hike.

FORECAST

BASED ON THE CURRENT PRICE AT 95.495, THE DIRECTION OF THE DOLLAR INDEX TODAY IS LIKLEY TO BE DETERMINED BY TRADER REACTION TO THE UPTRENDNG ANGLE AT 95.45.

A SUSTAINED MOVE OVER 95.45 WILL INDICATE THE PRESENCE OF BUYERS. THIS COULD CREATE ENOUGH UPSIDE MOMENTUM TO CHALLENGE THE SHORT-TERM 50% LEVEL AT 95.63. THIS IS FOLLOWED BY A RESISTANCE CLUSTER AT 95.79 TO 95.81.

A SUSTAINED MOVE UNDER 95.45 WILL SIGNAL THE PRESENCE OF SELLERS. THE NEXT TARGET IS THE MAIN 50% LEVEL AT 95.345. THE DAILY CHART OPENS UP UNDER THIS LEVEL WITH THE MAIN FIB LEVEL AT 95.12 THE NEXT LIKELY TARGET.

WATCH THE PRICE ACTION AND READ THE ORDER FLOW AT 95.45 TODAY. TRADER REACTION TO THIS ANGLE WILL TELL US IF THE BULLS OR THE BEARS ARE IN CONTROL.