U.S. Dollar Index (DX) Futures Technical Analysis – Counter-Trend Short-Sellers Targeting 93.745 – 93.560

The U.S. Dollar fell against a basket of major currencies for a second session on Friday after confirming the previous session’s closing price reversal top chart pattern. The likely catalysts behind the selling pressure were declines in Treasury yields and a fresh round of profit-taking following a steep rally earlier in the week. The move didn’t do any serious damage to the index with some traders saying the move may be temporary.

On Friday, December U.S. Dollar Index futures settled at 94.047, down 0.193 or -0.20%.

For the week, the dollar index posted its largest percentage gain since late August, as investors looked to the Federal Reserve’s reduction of asset purchases in November and a possible rate hike late next year.

The chart pattern suggests the start of a 2 to 3 day correction, which would be a welcomed sight for longer-term bulls who would rather buy dips than chase rallies at current price levels.

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing. However, momentum shifted to the downside on Friday with the confirmation of the previous session’s closing price reversal top.

A trade through 94.520 will negate the closing price reversal top and signal a resumption of the uptrend. The main trend will change to down on a trade through 92.970.

The minor range is 92.970 to 94.520. Its retracement zone at 93.745 to 93.560 is the first downside target. Since the main trend is up, buyers could come in on the first test of this area.

The short-term range is 91.935 to 94.520. Its retracement zone at 93.230 to 92.920 is another downside target.

Daily Swing Chart Technical Forecast

The direction of the December U.S. Dollar Index early Monday is likely to be determined by trader reaction to 94.260.

Bearish Scenario

A sustained move under 94.260 will indicate the presence of sellers. Taking out 94.000 will indicate the selling pressure is getting stronger. This could create the downside momentum needed to drive the index into 93.745 to 93.560.

Bullish Scenario

A sustained move over 94.260 will signal the presence of buyers. If this move generates enough upside momentum then look for a possible drive into 94.520 to 94.570. The latter is a potential trigger point for an acceleration to the upside with the next target the September 25, 2020 main top at 94.740.