U.S. Dollar Index (DX) Futures Technical Analysis – Momentum Shift Puts 94.570 – 94.400 on Radar

The U.S. Dollar fell against a basket of major currencies on Friday after data from the University of Michigan showed a steep drop in consumer sentiment. The move produced a potentially bearish closing price reversal top as the news gave long investors a chance to book profits after a three-day surge. The data also caused some investors to reduce chances of an earlier than expected Fed rate hike.

On Friday, December U.S. Dollar Index futures settled at 95.128, down 0.047 or -0.05%.

The University of Michigan’s Consumer Sentiment Index plunged to 66.8 in its preliminary November reading from October’s final reading of 71.7. That was the lowest level since November 2011 and was far short of the median estimate among economists of 72.4 in a Reuters poll.

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart, but Friday’s closing price reversal top suggests momentum may be shifting to the downside.

A trade through 95.270 will negate the closing price reversal top and signal a resumption of the uptrend. A move through 94.995 will confirm the chart pattern and shift momentum to the downside. This won’t change the main trend to down, but it could trigger the start of a 2 to 3 day correction with the retracement zone at 94.570 to 94.400 the next potential downside target.

Daily Swing Chart Technical Forecast

The direction of the December U.S. Dollar early Monday is likely to be determined by trader reaction to 94.995.

Bearish Scenario

A sustained move under 94.995 will indicate the presence of sellers. If this move is able to generate enough downside momentum then look for a 2 to 3 day break into 94.570 to 94.400. Since the main trend is up, buyers are likely to come in on a test of this area.

Bullish Scenario

A sustained move over 94.995 will signal the presence of buyers. If this generates enough upside momentum then look for a retest of 95.270.

Taking out 95.270 will indicate the buying is getting stronger. This could trigger an acceleration to the upside and put the index back on track for a rally to 96.500 over the near-term.