U.S. Dollar Index (DX) Futures Technical Analysis – Bullish Over 91.950, Bearish Under 91.850

The U.S. Dollar is trading slightly lower against a basket of major currencies early Tuesday ahead of U.S. inflation data, with investors on edge over whether the figures may offer clues about the likely timing of tapering and interest rate hikes.

The closely watched U.S. consumer price index (CPI) report is due to be released on Tuesday at 12:30 GMT. Economists expected the CPI to have risen by 0.5%, down from the last month’s 0.6%. Core U.S. consumer prices are expected to have risen 0.4% in June, according to a Reuters poll.

At 04:36 GMT, September U.S. Dollar Index futures are trading 92.180, down 0.076 or -0.08%.

The dollar is being driven by U.S. rate expectations, and it is up nearly 2% in the month since the Federal Reserve surprised markets – and cleared out huge bets on the dollar falling – by projecting sooner-than-expected rate hikes in 2023.

If the CPI comes in lower than expected, the Fed would feel slightly less inclined to ease its asset purchases, which would pressure the U.S. Dollar, but if it is concerned about inflation, it is more likely to address tapering stimulus, supporting the Greenback.

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart. A trade through 91.995 will change the main trend to down. A move through 92.840 will signal a resumption of the uptrend.

The index is currently straddling a minor pivot at 92.175. This falls inside a longer-term retracement zone at 91.850 to 92.495.

An intermediate-term retracement zone at 91.950 to 91.490 is potential support.

The two zones combine to form price cluster support at 91.950 – 91.850.

Daily Swing Chart Technical Forecast

The direction of the September U.S. Dollar Index on Tuesday is likely to be determined by trader reaction to 92.175.

Bullish Scenario

A sustained move over 92.175 will indicate the presence of buyers. If this creates enough upside momentum then look for the rally to possibly extend into 92.495. Overtaking this level could lead to a test of 92.840. This is a potential trigger point for an acceleration into the March 31 main top at 93.430.

Bearish Scenario

A sustained move under 92.175 will signal the presence of sellers. This could lead to a labored break with potential downside targets lined up at 92.075, 91.995, 91.950 and 91.850. Since the main trend is up, buyers could come in on a test of these levels.

Taking out 91.850 with strong volume could trigger an acceleration into 91.505 to 91.490. The latter is an even bigger trigger point for a steep near-term break.