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U.S. Dollar Index (DX) Futures Technical Analysis – Lower, but Stable Ahead of Fed Interest Rate Decision

By:
James Hyerczyk
Published: Sep 20, 2022, 07:52 UTC

Treasury yields are giving back some of yesterday’s advance to their highest levels since 2007, putting a little pressure on the dollar index.

US Dollar Index

In this article:

The U.S. Dollar is edging lower against a basket of major currencies on Tuesday as traders adjust their positions ahead of the start of the Federal Reserve’s two-day policy meeting later today.

Helping to put a little pressure on the index are slightly lower Treasury yields. They are giving back some of yesterday’s advance to their highest levels since 2007.

At 07:22 GMT, the December U.S. Dollar Index is trading 109.290, down 0.176 or -0.16%. On Monday, the Invesco DB US Dollar Index Bullish Fund ETF (UUP) settled at $29.36, down $0.04 or -0.14%.

Against the major currencies, the dollar is losing ground versus the Euro, British Pound and Canadian Dollars.

Based on recent comments from European Central Bank (ECB) officials, traders are expecting aggressive rate hikes over the next several months.

In the U.K., the Bank of England is expected to raise its benchmark rate by 50 basis points on Thursday.

Later today at 14:30 GMT, investors will get the opportunity to react to consumer inflation data out of Canada. The reports are expected to show inflation rose in August, which is likely to prompt calls for additional rate hikes.

In the U.S., investors will be focusing on reports on Building Permits and Housing Starts. Traders may show little reaction to the data with the Fed scheduled to announce a big interest rate hike on Wednesday. Ahead of the announcement, traders are looking for the Fed to raise rates 75 basis points with some experts calling for a full-percentage point increase.

Daily December U.S. Dollar Index

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart. A trade through 110.480 will reaffirm the uptrend. A move through 107.450 will change the main trend to down.

The short-term range is 107.450 to 109.995. Its retracement zone at 108.723 to 108.422 is the nearest downside target.

The major support is the long-term Fibonacci level at 107.780.

Daily Swing Chart Technical Forecast

Trader reaction to 109.535 is likely to determine the direction of the December U.S. Dollar Index on Tuesday.

Bearish Scenario

A sustained move under 109.535 will indicate the presence of sellers. If this move creates enough downside momentum then look for the selling to possibly extend into the short-term retracement zone at 108.723 to 108.422.

Bullish Scenario

A sustained move over 109.535 will signal the presence of buyers. If this generates enough upside momentum then look for a retest of the minor top at 109.995.

Side-Notes

Looking ahead, the short-term direction of the December U.S. Dollar Index is likely to be determined by trader reaction to 108.723 to 108.422.

The longer-term direction will be determined by trader reaction to 107.780.

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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