U.S. Dollar Index (DX) Futures Technical Analysis – Edging Higher Ahead of US Manufacturing PMI Report

The U.S. Dollar is trading higher against a basket of major currencies on Thursday, underpinned by higher U.S. Treasury yields and lower Euro, British Pound, Canadian Dollar and Japanese Yen.

A drop in investor sentiment is also driving investors into the safety of the U.S. Dollar amid weakness in the global stock markets. This move is being fueled by worries over a recession that could have a worldwide impact.

Supporting the notion of slower growth are regional purchasing managers’ indexes from South Korea, Japan and China on Thursday that all pointed to slowing global economic activity as rising interest rates, high inflation, the war in Ukraine and China’s COVID curbs took a heavy toll.

At 07:00 GMT, September U.S. Dollar Index futures are trading 109.040, up 0.375 or +0.35%. On Wednesday, the Invesco DB US Dollar Index Bullish Fund ETF (UUP) settled at $29.12, down $0.01 or -0.05%.

All of the major currencies are feeling the heat from the threat of higher U.S. interest rates. Expectations for a 75-basis point U.S. rate hike at next month’s Federal Reserve meeting are rising on the back of solid economic data, with Fed funds futures last pointing to a 75% chance of such an increase.

Later today at 11:30 GMT, traders will get the opportunity to react to the latest Challenger Job Cuts report. This will be followed at 12:30 GMT by Weekly Unemployment Claims, Revised Nonfarm Productivity, and Revised Unit Labor Costs. At 14:00 GMT, the major report is the ISM Manufacturing PMI report. Data on Construction Spending will also be reported.

The ISM Manufacturing report is expected to come in at 52.1, down slightly from 52.8. A move under 50.0 will indicate a contraction.

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart. A trade through 109.445 will signal a resumption of the uptrend. A move through 107.480 will change the main trend to down.

The minor trend is also up. A move through 108.235 will change the minor trend to down. This will shift the momentum to the downside.

The minor range is 107.480 to 109.445. Its pivot at 108.465 is the nearest support. This is followed by the major support at 107.780.

Daily Swing Chart Technical Forecast

Trader reaction to 108.840 is likely to determine the direction of the September U.S. Dollar Index on Thursday.

Bullish Scenario

A sustained move over 108.840 will indicate the presence of buyers. If this creates enough upside momentum then look for a surge into this week’s high at 109.445. A trade through this level could trigger an acceleration to the upside.

Bearish Scenario

A sustained move under 108.840 will signal the presence of sellers. The first downside targets are 108.465 and 108.235.

A failure to hold 108.235 could extend the selling pressure into 107.780, followed by 107.480.