U.S. Dollar Index (DX) Futures Technical Analysis – Breakout Over 93.43 Could Extend into 94.07 Over Short Run

The U.S. Dollar hit its highest level against a basket of major currencies since November 5 early Thursday as speculators bet the Federal Reserve would start tapering its massive economic stimulus before the end of the year. Helping to boost the index was a plunge by the Euro into its lowest level since November 4 at 1.1666.

At 05:18 GMT, September U.S. Dollar Index futures are trading 93.455, up 0.311 or +0.33%.

In the minutes of the Federal Open Market Committee’s (FOMC) July 27-28 meeting released on Wednesday, Fed officials saw the potential to ease bond-buying stimulus this year if the economy continues to improve as expected, although the condition of “substantial further progress” toward maximum employment had not yet been met, according to Reuters.

One reason for the dollar’s strength is that a reduction in debt purchases tends to drive up Treasury yields, making the greenback a more attractive investment. Furthermore, tapering by the Fed would be interpreted by investors as hawkish, while the central banks in the Euro Zone, the U.K. and Japan remain dovish.

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart. A trade through the March 31 main top at 93.430 reaffirmed the uptrend. A move through the intraday high at 93.515 will signal a resumption of the uptrend.

The main trend will change to down on a trade through the nearest swing bottom at 92.470.

The minor range is 92.470 to 93.515. Its 50% level or pivot at 92.995 is the nearest support.

The nearest major support level is 92.495.

Daily Swing Chart Technical Forecast

Although a break back under the former main top at 93.430 could be considered a sign of weakness, the direction of the September U.S. Dollar Index on Thursday will likely be determined by trader reaction to 93.145.

Bullish Scenario

A sustained move over 93.145 will signal the presence of buyers. Taking out the intraday high at 93.515 will indicate the buying is getting stronger. The daily chart indicates there is plenty of room to the upside with 94.070 the next major upside target.

Bearish Scenario

A sustained move under 93.145 will indicate the presence of sellers. If this move creates enough downside momentum then look for the selling to possibly extend into the pivot at 92.995.

Side Notes

Watch for volatility at 12:30 GMT with the release of the U.S. Weekly Unemployment Claims report.