U.S. Dollar Index (DX) Futures Technical Analysis – Near-Term Direction Determined by 97.470 – 97.920 RT Zone

The U.S. Dollar slipped to its lowest level since January 17 against a basket of currencies on Monday, as investors bet on the U.S. Federal Reserve easing policy in a bid to offset the negative impact from the spread of the new coronavirus.

Sellers were prompted early in the session after U.S. Federal Reserve Chairman Jerome Powell said in a statement on Friday the Fed would “act as appropriate” to support the economy. Investors took his comments as a hint that the Fed will deliver a cut when it meets March 17-18, and as an encouragement to central banks around the world to follow suit. Federal Funds futures now imply a 50 basis point cut at the meeting.

On Monday, March U.S. Dollar Index futures settled at 97.319, down 0.762 or -0.78%.

Daily Technical Analysis

The main trend is down according to the daily swing chart. The trend turned down when sellers took out the previous main bottom at 97.165. This comes as no surprise since momentum shifted to the downside last week.

The main trend will change to up on a trade through 99.815. This is highly unlikely today, but since the market is down seven sessions, it will begin Tuesday’s session inside the window of time for a closing price reversal bottom.

The main range is 96.020 to 99.815. Its retracement zone at 97.920 to 97.470 is controlling the longer-term direction of the index. Closing below it puts the index in a weak position.

Short-Term Outlook

Based on Monday’s close, near-term direction of the March U.S. Dollar Index will be determined by trader reaction to the main Fibonacci level at 97.470.

Bearish Outlook

A sustained move under 97.470 will indicate the presence of sellers. Crossing to the weak side of the uptrending Gann angle at 97.300 will indicate the selling pressure is getting stronger. This could trigger a further break into the next main bottom at 96.815.

Taking out 96.815 will reaffirm the downtrend. This could trigger a further decline into a pair of uptrending Gann angles at 96.660 and 96.340. The latter is the last potential support angle before the 96.020 main bottom.

Bullish Outlook

Overcoming and sustaining a rally over 97.470 will signal the return of buyers. The first short-covering rally should lead to a test of the resistance cluster at 97.920 to 98.065. Sellers could come in on the first test of this area. However, taking out the downtrending angle could trigger an acceleration to the upside with the next major targets an uptrending Gann angle at 98.585 and a downtrending Gann angle at 98.940.

Side Notes

The big decision for traders is what to do with the dollar once the Fed cuts rates?  Right now, traders aren’t sure if the Fed will cut 25 basis points or 50 basis points so we could see some two-sided trading as investors start to pick a side.