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U.S. Dollar Index (DX) Futures Technical Analysis – Greenback Rebounds from Low on Higher Fed End Rate Expectations

By:
James Hyerczyk
Updated: Dec 4, 2022, 07:14 UTC

After the release of the hot labor market report, the Fed could still slow the pace of rate hikes, but take rates to a slightly higher peak rate.

US Dollar Index

In this article:

The U.S. Dollar closed lower on Friday, but found support after Treasury yields pulled back from an earlier surge as investors looked beyond stronger-than-expected labor data.

Non-Farm Payrolls increased 263,000 for the month while the unemployment rate was 3.7%, the Labor Department reported Friday. Economists surveyed by Dow Jones had been looking for an increase of 200,000 on the payrolls number and 3.7% for the jobless rate.

However, the Fed’s anti-inflation efforts took a hit after the government reported average hourly earnings jumped 0.6% for the month, double the Dow Jones estimate. Additionally, wages were up 5.1% on a year-over-year basis, also well above the 4.6% expectation.

On Friday, the December U.S. Dollar Index settled at 104.500, down 0.1890 or -0.18%. The Invesco DB US Dollar Index Bullish Fund ETF (UUP) finished at $28.22, down $0.04 or -0.14%.

Fed May Have to Raise Rates Higher than Previously Anticipated

Fed officials have been indicating that the pace of rate hikes could slow down soon, and markets are now expecting the central bank to implement a 50 basis point rate hike at its December meeting.

However, after the release of the hot labor market report, the Fed could still slow the pace of rate hikes, but take rates to a slightly higher peak rate.

The Federal Reserve will likely raise borrowing costs to a “slightly higher” peak than envisioned in forecasts from September, Chicago Federal Reserve Bank President Charles Evans said on Friday.

“We probably are going to have to have a slightly higher peak rate of the funds rate, even as we likely will step down” the pace of rate hikes from the 75-basis-per-meeting pace of recent meetings, Evans said at an event in Chicago.

Daily December US Dollar Index

Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart. A trade through 103.935 will signal a resumption of the downtrend. A move through 107.150 will change the main trend to up.

The minor range is 107.150 to 103.935. Its pivot is 105.543.

Bearish Scenario

A sustained move under 105.543 will indicate the presence of sellers. If this creates enough downside momentum then look for a retest of 103.935. This is a potential trigger point for an acceleration to the downside with a long-term 50% level at 101.125 the primary downside target.

Bullish Scenario

A sustained move over 105.543 will signal the presence of buyers. If this generate enough upside momentum then look for a counter-trend surge into the main top at 107.150. Taking out this level will change the main trend to up and could drive the index into the resistance cluster at 107.780 – 107.895.

For a look at all of today’s economic events, check out our economic calendar.

About the Author

James is a Florida-based technical analyst, market researcher, educator and trader with 35+ years of experience. He is an expert in the area of patterns, price and time analysis as it applies to futures, Forex, and stocks.

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