U.S. Dollar Index (DX) Futures Technical Analysis – Bulls Facing Major Challenge at 92.495 – 92.350

The U.S. Dollar weakened against a basket of its peers on Monday as investors shifted their focus to this week’s Federal Reserve meeting. A dip in Treasury yields and a subdued rally in the U.S. equity markets also contributed to the weaker trade.

A stronger Euro was a major influence on the index. The single-currency firmed despite a report that showed German business morale fell unexpectedly in July on continuing supply chain worries and rising coronavirus infections, a survey showed on Monday.

On Monday, September U.S. Dollar Index futures settled at 92.651, down 0.277 or -0.30%.

In economic news, the U.S. Department of Housing and Urban Development released new home sales data Monday for the month of June, which were weaker by 6.6% compared to the 3% increase initially estimated by analysts. Some are saying we’ve seen the top of the housing market.

The Federal Open Market Committee’s two-day meeting is due to begin on Tuesday, with a policy statement issued on Wednesday afternoon at 18:00 GMT.

While no Federal Reserve policy changes are expected in July’s meeting, we could hear more about the tapering discussions that started in June. The volume surrounding this issue is likely to be turned up at the August Jackson Hole conference with the risks remaining skewed towards earlier policy normalization that the Fed is currently signaling, ING analysts said.

I wouldn’t read much into the dollar’s price action ahead of the Fed. Most of it is likely position-squaring ahead of the announcements. Short-covering by Euro traders were also a big influence on the index since the single-currency carries a 57% weight.

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart, however, momentum is trending lower. A trade through 93.195 will signal a resumption of the uptrend. The main trend will change to down on a move through 92.075.

The minor trend is also up. A trade through 92.505 will change the minor trend to down. This will confirm the shift in momentum. A new minor top was formed at 93.040.

The minor range is 93.195 to 92.505. Its 50% level at 92.850 is potential resistance.

On the downside, potential support is 92.495 to 92.350 and 91.950 to 91.850.

Daily Swing Chart Technical Forecast

The direction of the September U.S. Dollar index early Tuesday is likely to be determined by trader reaction to 92.850.

Bearish Scenario

A sustained move under 92.850 will indicate the presence of sellers. This could lead to a test of a cluster of levels at 92.505, 92.495 and 92.350. The latter is a potential trigger point for an acceleration to the downside with 92.075 the next likely target.

Bullish Scenario

A sustained move over 92.850 will signal the presence of buyers. Taking out the 93.040 minor top will indicate the buying is getting a little strong. A move through 93.195 will reaffirm the uptrend with the March 31 main top at 93.430 the primary upside target.