U.S. Dollar Index (DX) Futures Technical Analysis – Could Be Setting Up for Start of Counter-Trend Rally

The U.S. Dollar is trading higher against a basket of currencies late Friday after touching its lowest level since January 8 earlier in the session. The greenback was boosted by encouraging U.S. manufacturing data. Despite the gain, the index was still in a position to close lower for the week.

At 20:30 GMT, June U.S. Dollar Index futures were trading 89.985, up 0.190 or +0.21%.

After early session weakness, the dollar rebounded after data showed U.S. factory activity gathered speed in early May amid strong domestic demand.

The May flash reading for the Markit manufacturing purchasing managers index came in at 61.5, above the 60.5 projected by economists, according to Dow Jones. The services PMI result also beat expectations.

Existing home sales in April declined month-over-month and missed expectations as U.S. housing supply remained tight.

Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart. The downtrend was reaffirmed early in the session when sellers took out the February 25 main bottom at 89.655. A trade through 90.910 will change the main trend to up.

The minor trend is also down. A trade through 90.280 will change the minor trend to up. This will shift momentum to the upside.

The minor range is 90.910 to 89.630. Its 50% level or pivot comes in at 90.270.

The short-term range is 91.435 to 89.630. If the minor trend changes to up then look for the rally to extend into its retracement zone at 90.535 to 90.745.

Short-Term Outlook

A close over 89.795 will form a closing price reversal bottom. If confirmed, this could trigger the start of a 2 to 3 day counter-trend rally.

Any rally is likely to be labored with potential resistance at 90.270, 90.280, 90.535 and 90.745. However, once these levels are cleared, buyers will have a clean shot at taking out 90.910 and changing the main trend to up.

On the downside, taking out 89.630 will negate any chance at a closing price reversal bottom. This could trigger an acceleration into the January 6 bottom at 89.155.

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