US Dollar Index (DX) Futures Technical Analysis – Trend Changes to Down Under 94.115

Short-covering and position-squaring after a steep sell-off on Thursday helped drive December U.S. Dollar Index futures higher early in the session on Friday, but the thin-holiday buying wasn’t enough to sustain the rally.

The catalysts driving the index lower for the session were concerns over a possible delay in U.S. tax reform. This is giving investors enough jitters to send them out of the dollar and into safe haven assets like gold and the Japanese Yen.

Daily Swing Chart Analysis

The main trend is up according to the daily swing chart, however, momentum has shifted to the downside, putting the market in a position to take out the last main bottom at 94.115. A trade through this level will change the main trend to down. This could trigger a potential break into a series of main bottoms at 93.365 and 92.635 over the near-term.

On the upside, overcoming and sustaining the move over 95.07 will signal a resumption of the uptrend with the July 5 top at 96.065 the next major target.

Daily Retracement Zone Analysis

The main range is 97.30 to 90.795. Its retracement zone is 94.048 to 94.815. The index is currently trading inside this zone. This zone is actually controlling the longer-term direction of the index.

A sustained move over 94.815 will signal the presence of buyers. A sustained move under 94.048 will indicate the presence of sellers.

The short-term range is 92.635 to 95.06. If the trend changes to down then look for a drive into its retracement zone at 93.853 to 93.565.

Another main range is 90.795 to 95.07. If the selling pressure continues under the Fibonacci level at 93.565 and the swing bottom at 93.365 then look for the selling to extend into the next retracement zone at 92.933 to 93.428.

I don’t think we’re going to see a lot of volatility or two-sided trading, but I do think the index is vulnerable to the downside since the tax reform delay news is a major surprise.