U.S. Dollar Index (DX) Futures Technical Analysis – Main Trend Up, but Momentum Trending Lower

The U.S. Dollar is under pressure against a basket of currencies on Thursday after the Euro and British Pound jumped after the European Central Bank said it would continue to cut its bond purchases, while the Bank of England became the first major central bank to raise interest rates since the beginning of the pandemic.

At 15:03 GMT, March U.S. Dollar Index futures are trading 95.920, down 0.562 or -0.58%. The Invesco DB US Dollar Index Bullish Fund is at $25.73, down $0.12 or -0.45%.

The dollar was under pressure before the BoE and ECB announcements after posting a closing price reversal top the previous session. The selling began after the Fed announced on Wednesday it will end its pandemic-era bond buying in March and pave the way for an expected three interest rate hikes in 2022.

The Euro surged after the ECB said it will cut bond buys under its 1.85 trillion Euro Pandemic Emergency Purchase Programme and it will end the scheme as expected in March. It will, however, ramp up bond buying under the longer-running but more rigid Asset Purchase Programme (APP).

The Sterling popped higher after the BoE raised its main interest rate to 0.25% from an historic low of 0.1%.

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart, however, momentum shifted to the downside earlier today when sellers confirmed yesterday’s closing price reversal top.

A trade through 96.895 will negate the closing price reversal top and signal a resumption of the uptrend. A move through 95.500 will change the main trend to down.

The short-term range is 95.500 to 96.895. The index is currently trading on the weak side of its pivot at 96.200, making it resistance.

The intermediate 50% level at 95.355 is the next downside target, followed by the main retracement zone at 95.050 to 94.610.

Daily Swing Chart Technical Forecast

The direction of the March U.S. Dollar Index into the close on Thursday will be determined by trader reaction to 96.200.

Bearish Scenario

A sustained move under 96.200 will indicate the presence of sellers. If this move continues to generate enough downside momentum then look for the selling to possibly extend into the main bottom at 95.500, followed by the 50% level at 95.355.

Bullish Scenario

A sustained move over 96.200 will signal the presence of buyers. This could trigger a quick rally into a minor pivot at 95.350. Sellers could come in on the first test of this level. Overcoming this level could drive the index into 96.895.