U.S. Dollar Index (DX) Futures Technical Analysis – Hot PPI Data Could Fuel Extension of Rally

The U.S. Dollar closed higher against a basket of major currencies on Wednesday after stronger-than-expected U.S. retail sales data highlighted the resilience of the world’s largest economy. The move drove Treasury yields higher, making the greenback a more attractive asset while solidifying the case for further rate hikes by the Federal Reserve.

On Wednesday, the March U.S. Dollar Index settled at 103.839, up 0.716 or +0.69%. The Invesco DB US Dollar Index Bullish Fund ETF (UUP) finished at $28.06, up $0.18 or +0.65%.

U.S. retail sales rebounded sharply in January after two straight monthly declines, driven by purchases of motor vehicles and other goods, the U.S. Commerce Department said on Wednesday.

On Thursday, the March U.S. Dollar Index is likely to be influenced by Producer Price Index (PPI) data. Headline PPI is expected to show a monthly increase of 0.4%. Core PPI is expected to have risen 0.3%.

Traders will also have a chance to react to data on Philly Fed Manufacturing, Building Permits and Housing Starts. Weekly Unemployment Claims are expected to have risen from 196K to 200K.

Daily March U.S. Dollar Index Technical Analysis

The main trend is up according to the daily swing chart. A trade through 104.030 will signal a resumption of the uptrend. A move through 100.680 will change the main trend to down.

The minor trend is also up. A trade through 102.390 will change the minor trend to down. This will also shift momentum to the downside.

The index closed on the strong side of a long-term Fibonacci level at 103.664, making it support. This is followed by a 50% level at 103.090.

On the upside, the next major target is a long-term 50% level at 105.723.

Daily March US. Dollar Index Technical Forecast

Trader reaction to the long-term Fibonacci level at 103.664 is likely to determine the direction of the March U.S. Dollar Index on Thursday.

Bullish Scenario

A sustained move over 103.664 will indicate the presence of buyers. Taking out 104.030 will signal a resumption of the uptrend. It could also trigger an acceleration to the upside with 105.500 – 105.723 the next major target zone.

Bearish Scenario

A sustained move under 103.664 will signal the presence of sellers. This could fuel a quick break into 103.090. Buyers could come in on the first test of this level, but if it fails, we could see an extension of the selling into the support cluster at 102.390 – 102.265.