U.S. Dollar Index (DX) Futures Technical Analysis – Big Challenge for Short-Sellers at 92.510 – 92.475

The U.S. Dollar finished lower against a basket of its peers on Monday, after a triple blow of retreating yields, soft U.S. economic data and a dip in safe-haven demand exerted broad selling pressure.

The session started with the dollar capped by a delay in the review of the U.S.-China trade deal this week, which reduced the greenback’s appeal as a safe-haven asset. The news left the agreement standing and reinforced a belief that the trade relationship can hold even amidst conflict on multiple other fronts.

On Monday, September U.S. Dollar Index futures settled at 92.847, down 0.238 or -0.25%.

Meanwhile, a fresh rally in tech stocks added to the positive mood, and together with a pullback in U.S. yields and a weak reading in a U.S. manufacturing survey has many traders sticking to their bearish convictions on the dollar.

Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart. A trade through 93.895 will change the main trend to up. A move through 93.980 will reaffirm the uptrend.

A trade through 92.475 will reaffirm the downtrend with the next major target a main bottom at 92.160.

The minor trend is also down. The minor trend will change to up on a move through 93.410. This move will also shift momentum to the upside.

The minor range is 93.980 to 92.475. Its 50% level at 93.230 is resistance. However, crossing to the strong side of this level will indicate a hit of short-covering.

Short-Term Outlook

The negatives for the dollar are mostly still in place, which is encouraging the major players to hold on to their short positions. Net bearish bets on the U.S. dollar grew to their largest since May 2011 last week and spot trade in recent days suggest the position has only grown further since.

A third trip down to 92.510 to 92.475 in less than a month should be watched closely because if the selling pressure stalls, we could see a sharp pullback due to the size of the short positions. However, if the area fails, we could see an acceleration to the downside, which would then turn 92.475 to 92.510 into new resistance.