Trade Through 95.70 Confirms US Dollar’s Reversal Bottom

The U.S. Dollar is edging higher against a basket of major currencies early Monday as Friday’s surprisingly strong January jobs report continues to generate some buying interest.

An unexpected jump in U.S. job growth in January drove U.S. Treasury yields sharply higher, making the U.S. Dollar a more attractive investment. Data showed U.S. Non-Farm Payrolls increased by 467,000 jobs last month. The news also solidified a 25-basis point rate hike for March by the Federal Reserve.

At 06:14 GMT, March U.S. Dollar Index futures are trading 95.570, up 0.090 or +0.09%. On Friday, the Invesco DB US Dollar Index Bullish Fund ETF (UUP) settled at $25.55, down $0.01 or -0.06%.

There are no major U.S. economic reports on Monday, however, dollar traders will be eyeing the movement in Treasury yields and Thursday’s U.S. consumer price index (CPI).

Traders will also be watching the Euro because it is the most heavily weighted currency in the dollar index. Last week, the Euro surged to a three-week high after the European Central Bank (ECB) took an unexpected hawkish turn.

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart, however, momentum is trending lower.

A trade through 94.610 will change the main trend to down. A move through 97.440 will signal a resumption of the downtrend.

The minor trend is down. This is controlling the momentum.

On Friday, the index formed a potentially bullish closing price reversal bottom. A trade through 95.695 will confirm the chart pattern. A move through 94.820 will negate the chart pattern.

The main range is 93.200 to 97.440. Its retracement zone at 95.320 to 94.820 is support. This zone stopped the selling on Friday at 95.145.

The new minor range is 97.440 to 95.145. Its retracement zone at 96.295 to 96.565 is the nearest resistance zone.

Daily Swing Chart Technical Forecast

The direction of the March U.S. Dollar Index on Monday is likely to be determined by trader reaction to 95.420.

Bullish Scenario

A sustained move over 95.420 will indicate the presence of buyers. Taking out 95.695 will confirm the closing price reversal bottom. If this move creates enough upside momentum then look for the start of a 2 to 3 day rally with 96.295 – 96.565 the next likely target zone.

Bearish Scenario

A sustained move under 95.420 will signal the presence of sellers. The first downside target is 95.320, followed by 95.145.

Taking out 95.145 will negate the closing price reversal bottom. This could lead to a test of 94.820, followed by 94.610. This is a potential trigger point for an acceleration to the downside.