U.S. Dollar Index (DX) Futures Technical Analysis – Greenback Plunges Against Major Currencies as CPI Tames

The U.S. Dollar is sharply lower against a basket of major currencies shortly before the mid-session on Tuesday.

The catalyst behind the plunge is data showing that underlying U.S. consumer inflation rose less than expected last month, reinforcing expectations that the Federal Reserve will slow the pace of its rate increases at the conclusion of its two-day meeting on Wednesday.

At 15:46 GMT, December U.S. Dollar Index futures are trading 103.820, down 1.284 or -1.22%. The Invesco DB US Dollar Index Bullish Fund ETF (UUP) is at $28.09, down $0.29 or -1.04%.

The U.S. Consumer Price Index (CPI) report supported widely-held expectations that the Fed will reduce the size of its rate increase when it announces its decision on Wednesday.

Fed funds futures have also priced in a lower terminal rate, or that level where the Fed stops hiking, of 4.8%, expected to hit in May. That was down from about 5.1% seen late last month.

Helping to drive the dollar index lower is the Euro, up 0.93%. The British Pound is up 1.05% and the Canadian Dollar is up 0.67%. The USD/JPY is posting a 1.84% loss.

Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart. The downtrend was reaffirmed on Tuesday when sellers took out the recent main bottom at 103.935. A trade through 105.800 will change the main trend to up.

The nearest support is the June 16 main bottom at 102.950. The closest resistance is the minor pivot at 105.340.

Daily Swing Chart Technical Forecast

Trader reaction to 105.104 will determine the direction of the December U.S. Dollar Index on Tuesday.

Bearish Scenario

A sustained move under 105.104 will indicate the presence of sellers. If this continues to generate enough downside momentum then look for the selling to possibly extend into 102.950. This level is a potential trigger point for an acceleration to the downside with a long-term 50% level at 101.125 the next target.

Bullish Scenario

A sustained move over 105.104 will signal the return of buyers. Taking out 105.340 will indicate the buying is getting stronger. This could create the momentum needed to challenge the main top at 105.800. Taking out this top will change the main trend to up and could trigger an acceleration to the upside.