U.S. Dollar Index (DX) Futures Technical Analysis – Could Be Setting Up for Breakout into 91.555 to 91.830

The U.S. Dollar is trading higher against a basket of major currencies on Friday, putting it in a position to close higher for the week after three straight weeks of declines. Most of the gains have been fueled by a weaker Euro and British Pound as well as concerns over the stalemate in Washington over additional coronavirus-relief stimulus.

At 19:39 GMT, March U.S. Dollar Index futures are trading 90.920, up 0.169 or +0.19%.

While the greenback continues to lose ground to the higher-yielding Aussie and Kiwi, it did make a comeback in Europe as the tone soured and Brexit worries added to the delays facing a new U.S. fiscal stimulus package.

The Dollar gained on the Euro just a day after the European Central Bank (ECB) announced a new round of stimulus in line with market expectations. EU leaders also reached a compromise over a pandemic aid package. Traders are also concerned that ECB leaders may try to talk down the currency, given its high price’s impact on Euro Zone exports.

The state of the post-Brexit trade talks was also weighing on the market. Britain is now more likely to leave the European Union on December 31 without a trade deal than with a deal, an EU official quoted the head of the European Commission as telling the bloc’s 27 national leaders.

The Sterling suffered heavy losses and was down about 0.8% before a weekend of brinkmanship. British and EU negotiators have been told they have until the end of Sunday to decide whether a trade deal is possible.

Options market moves show traders bracing for chaos, with one-week implied volatility at a nine-month high and the premium of sterling puts to calls near its highest since April as investors pay for downside protection.

Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart. A trade through 90.380 will signal a resumption of the downtrend. The main trend will change to up on a move through 92.730.

The minor trend is also down. However, a move through the minor top at 91.150 could trigger a breakout to the upside after four days of sideways price action.

The minor range is 90.380 to 91.150. Its 50% level at 90.765 is controlling the direction of the market on Friday.

The short-term range is 92.730 to 90.380. If there is a breakout over 91.15 then look for the rally to possibly extend into the retracement zone at 91.555 to 91.830.

Daily Swing Chart Technical Forecast

The direction of the March U.S. Dollar Index into the close on Friday is likely to be determined by trader reaction to the minor pivot at 90.765.

Bullish Scenario

A sustained move over 90.765 will indicate the presence of buyers. The first upside target is 91.150. If a breakout over this level creates enough upside momentum then look for a possible acceleration into the retracement zone at 91.555 to 91.830. Since the main trend is down, sellers are likely to come in on a test of this area.

Bearish Scenario

A sustained move under 90.765 will signal the presence of sellers. This could create the downside momentum needed to challenge the minor bottom at 90.380. This is a potential trigger point for an acceleration to the downside with the July 7, 2018 main bottom at 89.790 the next likely downside target.