U.S. Dollar Index (DX) Futures Technical Analysis – Be Careful Shorting into 91.555 – 91.100 Retracement Zone

The June U.S. Dollar is inching lower against a basket of currencies on Friday as investors continue to react to the choppy, but weak trade in U.S. Treasury yields. Nonetheless, the greenback is headed for its worst consecutive weekly drop this year amid an extended decline in Treasury yields as investors increasingly put their trust into the Federal Reserve’s insistence of keeping an accommodative policy stance for a while longer.

At 14:22 GMT, the June U.S. Dollar Index is trading 91.580, down 0.038 or -0.04%.

One has to be careful getting “too short” or “too bearish” the U.S. Dollar Index at current price levels. The index is down 12 sessions from its most recent top, which makes it ripe for a closing price reversal bottom. Furthermore, it is testing the February 25 to March 31 range’s 50% to 61.8% retracement zone, an area known to bring in buyers.

Furthermore, although the Fed is dovish in its tone, the economy is still growing so Treasury yields are justifiably higher than they were earlier in the year. That being said, the dollar could also be finding its “sweet spot” since the U.S. economy is performing better than most of the economies in the index, especially the Euro Zone.

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart. However, momentum is trending lower. The main trend will change to down on a trade through 91.290.

A move through 93.470 will signal a resumption of the uptrend. This is highly unlikely, but due to the prolonged move down in terms of price and time, the index is trading inside the window of time for a closing price reversal top.

The minor trend is also down. A new minor top was formed earlier today at 91.810. A trade through this level will change the minor trend to up. This will shift momentum to the upside.

The index is currently trading on the weak side of the main retracement zone at 91.870 to 92.510. This zone is potential resistance. It’s also controlling the near-term direction of the market.

The short-term range is 89.655 to 93.470. Its retracement zone at 91.555 to 91.100 is potential support. The index is currently testing the upper level of this zone.

Daily Swing Chart Technical Forecast

The direction of the June U.S. Dollar Index on Friday is likely to be determined by trader reaction to 91.555.

Bearish Scenario

A sustained move under 91.555 will signal the presence of sellers. This could trigger a break into the main bottom at 91.290, followed by the Fibonacci level at 91.100.

Bullish Scenario

A sustained move over 91.555 will indicate the presence of buyers. This could trigger a rally into 91.810, followed closely by the 50% level at 91.870. This is a potential trigger point for an acceleration to the upside.