U.S. Dollar Index (DX) Futures Technical Analysis – Close Over 96.500 Puts Index in Bullish Position

The U.S. Dollar is inching higher against a basket of major currencies early Thursday as traders prepare for the release of the U.S. Non-Farm Payrolls report. Helping to support the green back are firm U.S. Treasury yields. Although the Omicron coronavirus is spreading in the United States, traders are showing a limited reaction to the news.

At 06:00 GMT, December U.S. Dollar Index futures are trading 96.165, up 0.007 or +0.01%. On Thursday, the Invesco DB US Dollar Index Bullish Fund (UUP) settled at $25.77, up $0.01 or +0.02%.

The index has been strengthening since Tuesday when Federal Reserve Chair Jerome Powell said U.S. central bankers in December will discuss whether to end their bond purchases a few months earlier than had been anticipated. He said the move would be necessary because of a strong economy, stalled workforce growth, and high inflation that is expected to last into mid-2022.

Looking ahead to Friday’s U.S. Non-Farm Payrolls report, U.S. employers likely stepped up hiring in November as they scrambled to meet strong demand for goods and services, giving the economy a strong boost as another challenging year draws to a close, though worker shortages remained a constraint.

Non-Farm Payrolls likely increased by 550,000 jobs last month after rising 531,000 in October, according to a Reuters survey of economists. The Unemployment Rate is expected to fall to a 20-month low of 4.5% and wages are expected to show an increase of 0.4%.

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart. A trade through 96.940 will signal a resumption of the uptrend. A move through 93.865 will change the main trend to down.

The minor trend is also up. A trade through 95.525 will change the minor trend to up. This will shift momentum to the downside.

One minor range is 95.525 to 96.940. The index is currently testing its pivot at 96.235.

On the upside, the major resistance is the long-term 50% level at 96.500.

On the downside, the first support is a pivot at 95.955. This is followed by 95.405.

The key support is the short-term retracement zone at 95.105 to 94.670. This area is controlling the near-term direction of the index.

Daily Swing Chart Technical Forecast

The direction of the December U.S. Dollar Index on Friday is likely to be determined by trader reaction to 96.235.

Bullish Scenario

A sustained move over 96.235 will indicate the presence of buyers. This could trigger a surge into 96.500. Crossing to the bullish side of this level will put the index in a strong position.

The next upside target is the main top at 96.940. This is a potential trigger point for a near-term acceleration into 97.120, followed by 98.230.

Bearish Scenario

A sustained move under 97.235 will signal the presence of sellers. The first downside target is 95.955. Taking out this level could trigger a break into 95.540, followed by 95.405.

Side Notes

A stronger-than-expected U.S. jobs report could trigger a breakout to the upside since it would likely drive up Treasury yields on expectations of a faster tapering by the Fed and a sooner-than-expected rate hike.