U.S. Dollar Index (DX) Futures Technical Analysis – Mixed Performance with Main Trend Up, Minor Trend Down

The U.S. Dollar is inching higher against a basket of major currencies on Wednesday after trading both sides of the market earlier in the session.

Bullish traders are trying to re-establish the uptrend that has carried the greenback to a 20-year high against its major peers for months. However, demand for the dollar has gone flat recently, as safe-haven demand subsided and Treasury yields paused their rally.

At 10:52 GMT, June U.S. Dollar Index futures are trading 103.500, up 0.093 or +0.09%. On Tuesday, the Invesco DB US Dollar Index Bullish Fund ETF (UUP) settled at $27.63, down $0.23 or -0.83%.

Underpinned by Hawkish Fed Chatter

After posting its biggest one-day setback in more than two months on Tuesday, the dollar is bouncing back early in today’s session, as U.S. Federal Reserve chief Jerome Powell struck a more hawkish tone as the central bank battles to rein in surging inflation.

Powell pledged that the U.S. central bank would ratchet up interest rates as high as needed, including taking rates above neutral, to kill a surge in inflation that he said threatened the foundation of the economy.

ECB Rate Hike Talk Capping Dollar Gains

Gains in the U.S. Dollar have also been capped recently by a stronger Euro. The single-currency is flirting with a one-week high a day after European Central Bank policymaker Klaas Knot said a 50 basis point rate increase in July was possible if inflation broadens. Knot is one of the more hawkish ECB members, according to Commerzbank.

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart, however, momentum has been trending lower since May 13. A trade through 105.065 will signal a resumption of the uptrend. A move through 102.375 will change the main trend to down.

The minor trend is down. It changed to down on Tuesday when sellers took out 103.405. This confirmed the shift in momentum.

On the upside, the nearest resistance is a pair of 50% levels at 103.720 and 104.150.

On the downside, the nearest support is a retracement zone at 102.430 to 101.820.

Daily Swing Chart Technical Forecast

Trader reaction to the first pivot at 103.720 is likely to determine the direction of the June U.S. Dollar Index on Wednesday.

Bearish Scenario

A sustained move under 103.720 will indicate the presence of sellers. Taking out the intraday low at 103.235 will indicate the selling pressure is getting stronger. This could trigger a plunge into the support cluster at 102.438 to 102.375.

Bullish Scenario

A sustained move over 103.720 will indicate the presence of buyers. Overtaking 104.150 will signal that the buying was getting stronger. This could trigger a surge into the main top at 105.065.