U.S. Dollar Index (DX) Futures Technical Analysis – Down Sharply on Dovish Fed Minutes

The U.S. Dollar is down sharply against a basket of major currencies late Wednesday after meeting minutes released at 19:00 GMT indicated that Federal Reserve officials earlier this month agreed that smaller interest rate increases should happen soon as they evaluate the impact policy is having on the economy.

At 19:09 GMT, the December U.S. Dollar index is trading 106.240, down 0.875 or -0.82%. The Invesco DB US Dollar Index Bullish Fund ETF (UUP) is at $28.62, down $0.26 or -0.90%.

Though hinting that smaller moves were ahead, officials said they still see little signs of inflation abating. However, some committee members expressed concern about risks to the financial system should the Fed continue to press forward at the same aggressive pace.

Today’s Fed news drove Treasury yields sharply lower, making the U.S. Dollar a less-attractive investment versus its peers.

Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart. A trade through 105.155 will signal a resumption of the downtrend.

The minor trend is also down. A trade through 107.895 will change the minor trend to up. This will also shift the momentum to the upside.

The minor range is 105.155 to 107.895. The index is trading on the weak side of its pivot at 106.525, making it resistance. The strongest resistance is a pair of Fibonacci levels at 107.780 and 108.197.

Daily Swing Chart Technical Forecast

Trader reaction to the minor pivot at 106.525 is likely to determine the direction of the December U.S. Dollar Index into the close on Wednesday.

Bearish Scenario

A sustained move under 106.525 will indicate the presence of sellers. If this creates enough downside momentum then look for a potential acceleration into the main bottoms at 105.155 and 104.150.

Bullish Scenario

A sustained move over 106.525 will signal the presence of buyers. If this generates enough upside momentum then look for a potential late session surge into 107.780.