U.S. Dollar Index (DX) Futures Technical Analysis – Momentum Shift Targets 93.275 Retracement Level

The U.S. Dollar is trading higher against a basket of major currencies on Monday, led by a strong performance against the Euro and Japanese Yen. The catalyst behind the move was the news that Pfizer Inc said its experimental vaccine was more than 90% effective in preventing COVID-19.

At 17:00 GMT, December U.S. Dollar Index futures are trading 92.860, up 0.635 or +0.69%. This is up from an earlier low of 92.120.

Bond yields soared in the United States, helping to make the U.S. Dollar a more attractive investment.  The yield on the 10-year Treasury note jumped 13 basis points to 0.95%. The benchmark rate touched a high of 0.97%, its highest level since March 20. The yield on the 30-year Treasury bond climbed 15 basis points to 1.742%.

Stocks also soared on the Pfizer news. If this continues then look for bond markets to sell off, driving yields higher. This will cause a repricing across all asset classes that could benefit the U.S. Dollar.

Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart, however, the early price action suggests a potentially bullish closing price reversal bottom may be forming. This won’t change the main trend to up, but if confirmed, it could lead to a 2 to 3 day counter-trend rally.

A trade through the intraday low at 92.120 will signal a resumption of the downtrend, while a close over 92.225 will form a closing price reversal bottom.

The short-term range is 91.750 to 94.795. Its 50% level at 93.275 is the primary upside target.

Short-Term Outlook

The early price action suggests the direction of the December U.S. Dollar Index into the close is likely to be determined by trader reaction to 92.225.

Bullish Scenario

A sustained move over 92.225 will indicate the presence of buyers. If this creates enough upside momentum then look for the rally to possibly extend into the 50% level at 93.275 over the near-term.

Bearish Scenario

A sustained move under 92.225 will signal the presence of sellers. Taking out the intraday low at 92.120 will signal a resumption of the downtrend.

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