James Hyerczyk
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US Dollar Index

March U.S. Dollar Index futures are trading sharply lower late in the session on Friday after posting a dramatic intraday reversal to the downside. The chart pattern suggests the short-term rally may have come to an end after Friday’s U.S. jobs report suggested that some recent aggressive buyers may have over-played their expectations for a stronger U.S. economic recovery from the coronavirus pandemic.

At 21:20 GMT, March U.S. Dollar Index futures are trading 90.995, down 0.525 or -0.57%.

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Analysts and investors have been weighing whether dollar strength this year has been a temporary reaction to a 7% loss in 2020 or is a longer-lasting shift away from dollar pessimism. The dollar index is still up 1.2% this year. Its rise has been supported by higher longer-term U.S. Treasury yields, which prompted traders to position for massive fiscal spending.

In economic news, the headline unemployment rate declined to 6.3% from 6.7% in January, according to the Labor Department, but some of the underlying numbers were less encouraging. The economy added 49,000 jobs, slightly missing estimates, and a revision to the December report showed a larger loss of jobs than previously reported.

Daily March U.S. Dollar Index

Daily Swing Chart Technical Analysis

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

A trade through 91.605 will signal a resumption of the uptrend, while the main trend will change to down on a move through the last swing bottom at 90.030.

The price action over the near-term is likely to be controlled by a series of retracement levels on both sides of the market.

On the upside, potential resistance comes in at 91.165, 91.370, 91.640 and 91.710.

On the downside, potential support is at 90.950, 90.820, 90.630, 90.380 and 90.100.


Short-Term Outlook

The main range is 94.250 to 89.165. Today’s high at 91.610 fell just short of its 50% level at 91.710.

The intermediate range is 92.165 to 89.165. Friday’s high occurred inside its retracement zone at 91.165 to 91.640.

Essentially, sellers came in a little under a resistance zone target at 91.640 to 91.710.

The new short-term rally is 89.165 to 91.605. If a closing price reversal top is formed on Friday and confirmed next week then look for a possible 2 to 3 day correction into its retracement zone at 90.385 to 90.10.

For a look at all of today’s economic events, check out our economic calendar.

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