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James Hyerczyk

The U.S. Dollar is trading slightly lower against a basket of major currencies after posting a wicked two-sided trade early Tuesday. The early session rally was fueled by increasing demand for risky assets as U.S. Treasury yields rose and equity markets soared on the back of upbeat comments over Brexit and better-than-expected U.S. earnings reports.

At 16:11 GMT, December U.S. Dollar Index futures are trading 98.015, down 0.155 or -0.16%.

The upbeat comments over Brexit, however, were a double-sided sword, however, with a surge in the British Pound helping to drive the index lower. The Euro also inched higher against the dollar. However, losses may have been limited by a drop in demand for the safe-haven Japanese Yen and Swiss Franc. The dollar also lost ground to the commodity-linked Canadian Dollar.

Dollar index traders are primarily focused on the British Pound after optimistic comments on Brexit from European negotiator Michel Barnier were backed up by reports that a draft legal text over the United Kingdom’s divorce from the European Union was being drawn up.

Daily December U.S. Dollar Index

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart, however, momentum has been trending lower since the formation of the closing price reversal top at 99.305 on October 1.

The main trend will change to down on a trade through 97.560. A move through 99.305 will negate the closing price reversal top and signal a resumption of the uptrend.

The minor trend is down. This move confirms the shift in momentum to the downside. A trade through 98.955 will change the minor trend to up.

The short-term range is 96.960 to 99.305. Its retracement zone at 98.135 to 97.855 is currently being tested. This zone provided support on Friday when the selling stopped at 97.885. Trader reaction to this retracement zone will likely determine the near-term direction of the index.

On the upside, 50% resistance levels come in at 98.435 to 58.595. On the downside, the major 50% support level is 97.140.


Daily Swing Chart Technical Forecast

Based on the early price action and the current price at 98.015, the direction of the December U.S. Dollar Index the rest of the session on Tuesday is likely to be determined by trader reaction to the 50% level at 98.135.

Bearish Scenario

A sustained move under 98.135 will indicate the presence of sellers. This could trigger a further break into Friday’s low at 97.885, followed by the Fibonacci level at 97.855. This is a potential trigger point for an acceleration to the downside with 97.560 the next likely downside target.

Bullish Scenario

Overcoming the 50% level at 98.135 and sustaining the move will signal the presence of buyers. If this creates enough upside momentum then look for an extension of the rally into the 50% level at 98.435.

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