U.S. Dollar Index (DX) Futures Technical Analysis – Chart Pattern Suggests Weakening Upside Momentum

The U.S. Dollar is edging higher against a basket of major currencies on Tuesday in a choppy, two-sided trade. The index is also on track to post its first monthly gain since September as investors bet that interest rates will remain elevated for longer-than previously anticipated.

At 17:30 GMT, March U.S. Dollar Index futures are trading 104.870, up 0.246 or +0.24%. The Invesco DB US Dollar Index Bullish Fund ETF (UUP) is at $28.42, up $0.08 or +0.28%.

Traders Influenced by Rising Treasury Yields

U.S. Treasury yields are little changed on Tuesday after the 2-year yield climbed slightly to 4.801% reaching its highest level since November on Monday. The 10-year Treasury yield also hit its highest level since November on Tuesday.

U.S. rate futures have priced in a peak fed funds rate, the Federal Reserve’s target policy rate, of 5.4% hitting in September. The market has all but priced out rate cuts this year.

Mixed Signals from US Economic Data

U.S. single-family home prices increased at their slowest pace in December since the summer of 2020. The S&P CoreLogic Case Shiller national home price index, covering all nine U.S. census divisions, increased 5.8% year-on-year in December, the smallest annual gain since August 2020, and followed a 7.6% rise in November.

The U.S. Chicago PMI, on the other hand, slid to 43.6 in February, weaker than expected, after falling to 44.3 in January.

U.S. consumer confidence also fell this month to 102.9, down from a revised 106 reading last month.

Gains May Be Limited

There are some analysts who believe that once the Fed’s rate hikes are priced in, the dollar’s gains will be limited. They also cite the stock market’s resilience as supporting this assessment.

Daily March U.S. Dollar Index Technical Analysis

The main trend is up according to the daily swing chart. However, momentum may be getting ready to shift to the downside following the confirmation of Monday’s closing price reversal top.

A trade through 105.320 will negate the chart pattern and signal a resumption of the uptrend. The main trend will change to down on a trade through 100.680.

The minor trend is also up. A trade through 103.685 will change the minor trend to down. This will confirm the shift in momentum.

On the upside, the major resistance is the long-term 50% level t 105.723. The nearest support is a minor pivot at 104.503, followed by a long-term Fibonacci level at 103.664.

Daily March U.S Dollar Index Technical Forecast

Trader reaction to the pivot 104.503 will determine the direction of the March U.S. Dollar Index into the close on Tuesday.

Bullish Scenario

A sustained move over 104.503 will indicate the presence of buyers. If this move creates enough upside momentum then look for a test of the minor top at 105.320.

Bearish Scenario

A sustained move under 104.503 will signal the presence of sellers. If this move generates enough downside momentum then look for the selling to possibly lead to a test of the support cluster at 103.664 – 103.685 over the near-term.