U.S. Dollar Index (DX) Futures Technical Analysis – Bullish US Economic Data Could Fuel Surge into 103.260

The U.S. Dollar is trading slightly lower against a basket of major currencies early Thursday after rising to its highest level in two-weeks the previous session. Fueling the price surge were higher Treasury yields. Renewed fears over inflation and a more aggressive Fed were primarily responsible for the jump in yields.

At 07:36 GMT, June U.S. Dollar Index futures are trading 102.305, down 0.224 or -0.22%. On Wednesday, the Invesco DB US Dollar Index Bullish Fund ETF (UUP) settled at $27.41, up $0.20 or +0.73%.

Yields Jump on Solid Manufacturing PMI Data

The U.S. benchmark 10-year yield hit a two-week high of 2.951% on Wednesday after data showed U.S. manufacturing activity had picked up in May as demand for goods remained strong, which could dampen fears of an imminent recession.

Rising yields and the possibility of more aggressive rate hikes by the Fed are making the U.S. Dollar a more attractive asset.

Trader Reaction to US Employment Data Sets the Tone on Thursday

U.S. Dollar traders are reacting early Thursday to a dip in the U.S. Treasury yield, with investors focusing on rising inflation, interest rate hikes and several key reports on the U.S. employment situation.

Looking ahead to Thursday’s data, there will be an ADP employment report at 12:30 GMT, with productivity and unit labor costs due at the same time. Factory orders data will also be out at 14:00 GMT.

In addition to the ADP private sector number, traders will be watching the Challenger Job Cuts report at 11:30 GMT and the Weekly Unemployment Claims data at 12:30 GMT.

Traders will be primarily interested in weakness in the labor reports. The Fed wants to slow down inflation, but it doesn’t want to do that at the expense of people’s jobs.

Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart. However, momentum is trending higher following the confirmation of Tuesday’s closing price reversal bottom.

A trade through 101.420 will shift momentum to the downside and signal a resumption of the downtrend. The main trend will change to up on a move through the last main top at 105.065.

The minor trend is up. It changed to up when buyers took out the minor top at 101.420. This confirms the shift in momentum.

The main range is 97.73 to 105.065. Its retracement zone at 101.400 to 100.530 is support.

The short-term range is 99.810 to 105.065. Traders are trying to establish support inside its retracement zone at 102.440 to 101.820.

The minor range is 105.065 to 101.420. Its 50% level or pivot at 103.260 is the next upside target.

Daily Swing Chart Technical Forecast

Trader reaction to the 50% level at 102.440 is likely to determine the direction of the June U.S. Dollar Index on Thursday.

Bullish Scenario

A sustained move over 102.440 will indicate the presence of buyers. If this move creates enough upside momentum then look for a surge into the pivot at 103.260.

Trader reaction to 103.260 will set the near-term tone. Since the main trend is down, sellers could come in on the first test of this level. Overtaking it, however, could trigger an acceleration to the upside.

Bearish Scenario

A sustained move under 102.440 will signal the presence of sellers. This could lead to a labored break with potential support lined up at 101.817, 101.420 and 101.400.

Taking out 101.400 with conviction could trigger an acceleration into the main Fibonacci level at 100.530.