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James Hyerczyk

The U.S. Dollar is trading higher against a basket of major currencies on Wednesday after consolidating the previous session. The early price action in the global equity markets suggests today may be a “risk-on” day, which would drive up demand for the higher-yielding U.S. Dollar.

Helping to boost demand for the greenback is another expected surge in U.S. government yields. This is based on a spike lower in the December 10-Year Treasury Note in the overnight market. Yields have been driven sharply higher this week, following the news that a vaccine developed by Pfizer and BioNTech is proven to be more than 90% effective in preventing COVID-19 among those without evidence of prior infection.

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At 08:56 GMT, December U.S. Dollar Index futures are trading 92.880, up 0.144 or +0.16%.

Daily December U.S. Dollar Index

Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart, however, the index is in a position to shift momentum to the upside, following the formation of the closing price reversal bottom on Monday.

A trade through 92.970 will confirm the chart pattern. It won’t change the main trend to up, but it could trigger the start of a two to three day counter-trend rally.

The minor range is 92.120 to 92.970. Its 50% level at 92.545 is support. Look for an upward bias to develop if buyers can hold above this level.

The short-term range is 94.330 to 92.120. If the reversal bottom is confirmed then look for the rally to possibly extend into its retracement zone at 93.225 to 93.490. Since the main trend is down, look for sellers on the first test of this area, but be prepared for a breakout to the upside if buyers can take out 93.490 with conviction.


Daily Swing Chart Technical Forecast

The early price action indicates that the direction of the December U.S. Dollar Index on Wednesday is likely to be determined by trader reaction to 92.545.

Bullish Scenario

A sustained move over 92.545 will indicate the presence of buyers. This could lead to a test of 92.970. Taking out this level is likely to trigger a surge into the retracement zone at 93.225 to 93.490.

Look for sellers on the first test of 93.225 to 93.490. Watch for an acceleration to the upside if buyers can take out the upper or Fibonacci level at 93.490.

Bearish Scenario

A sustained move under 92.545 will signal the presence of sellers. If this creates enough downside momentum then look for the selling to possibly extend into 92.120.

Side Notes

If risk is still on like it was on Monday and Treasury yields continue to rise, then look for the U.S. Dollar momentum to shift to the upside.

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

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