Momentum Shift Puts US Dollar in Position to Resume Uptrend

The U.S. Dollar edged higher against a basket of currencies for a fourth session on Friday, as crude prices reversed earlier weakness and added to pressure for the Federal Reserve to be aggressive in combating inflation.

The greenback posted a solid gain for the week, which marked its sixth weekly gain in the past seven. The dollar has benefited from its status as a safe haven and the conflict in Ukraine has driven expectations the Fed will hike interest rates.

On Friday, June U.S. Dollar Index futures settled at 98.822, up 0.022 or +0.02%. The Invesco DB US Dollar Index Bullish Fund ETF (UUP) closed at $26.42, up $0.02 or +0.06%.

Helping to fuel a late session rally by the index was a surge in U.S. Treasury yields. The 10-year U.S. Treasury yield hit a fresh two-year high Friday as investors anticipate a more aggressive Fed. The 10-year rate at its highs of Friday’s session hit 2.503%, its highest level since May 2019. The yield started the week near 2.15%.

Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart. A trade through 99.300 will change the main trend to up. A move through 97.715 will signal a resumption of the downtrend.

The minor trend is also down. A trade through 98.965 will change the minor trend to up. This will shift momentum to the upside.

The minor range is 99.470 to 97.715. The index settled on the strong side of its pivot at 98.595, making it support.

The next support is the major Fibonacci level at 98.200. A close below this level will be a sign of weakness.

Short-Term Outlook

Look for an upside bias as long as the index holds above the long-term Fibonacci level at 98.200. A sustained move over 98.595 will indicate the buying is getting stronger. If this creates enough upside momentum then look for momentum to shift to the upside on a move through 98.965.

The main trend will change to up on a trade through 99.300. The trend will be reaffirmed if buyers can take out 99.470. This is also the trigger point for an acceleration to the upside.

A downside bias will develop on a sustained move under 98.200. If this creates enough downside momentum then look for the selling to possibly extend into the main bottom at 97.715.

Taking out 97.715 will reaffirm the downtrend. This could lead to a test of minor pivot at 97.280. A failure at this level will lead to a test of the major 50% level at 96.720.