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U.S. Dollar Index (DX) Futures Technical Analysis – Needs to Clear 101.495 to Sustain Rally

By:
James Hyerczyk
Published: Mar 18, 2020, 19:35 UTC

Keep in mind that this aggressive U.S. Dollar buying is not going to last forever. And when it ends, there will be a violent correction as currencies return to more “normal” levels.

U.S. Dollar Index (DX) Futures Technical Analysis – Needs to Clear 101.495 to Sustain Rally

The U.S. Dollar extended it gains on Wednesday as companies and investors worried by the coronavirus outbreak rushed to the world’s most liquid currency. Fears over the economic fallout from the coronavirus pandemic and radical monetary policy action from the U.S. Federal Reserve are exerting further downward pressure over the past two weeks as investors flock to the surety of the dollar.

At 19:17 GMT, June U.S. Dollar Index futures are trading 101.395, up 1.591 or +1.50%.

Leading the index higher was a plunge in the British Pound. The Sterling plummeted to 1.1459 on Wednesday to hit its lowest point since October 2016 as liquidity concerns set the dollar surging and hammered currencies around the world.

The pound fell more than 4% on the session to hit its lowest point since 1985, with the exception of an overnight “flash crash” in October 2016 which took Sterling to 1.1450. The British Pound is currently trading below the levels seen in the aftermath of the Brexit referendum.

Daily June U.S. Dollar Index

Daily Technical Analysis

The main trend is up according to the daily swing chart. A trade through 94.530 will change the main trend to down.

There is no major resistance in the area, but the index is up seven sessions from its last main bottom, which puts it inside the window of time for a potentially bearish closing price reversal top.

On Wednesday, the index straddled a long-term 50% level at 101.493. Trader reaction to this level will determine the longer-term direction of the index.

Short-Term Outlook

Momentum is clearly to the upside. However, it could begin to weaken if buyers can’t sustain a rally over the 50% level at 101.493.

The other upside target is the steep uptrending Gann angle at 101.530. Crossing to the bullish side of this angle will put the Dollar Index in an extremely bullish position.

A failure to sustain a rally over 101.493 will indicate the buying is getting weaker and the selling is getting a little stronger. This could trigger a short-term correction, but not necessarily a change in trend to down.

Side Notes

Keep in mind that this aggressive U.S. Dollar buying is not going to last forever. And when it ends, there will be a violent correction as currencies return to more “normal” levels.

At this time the Fed and the other major central banks are trying to coordinate in order to provide dollar liquidity around the world. Once the liquidity concerns are dampened, all major currencies can snapback rather violently against the greenback.

About the Author

James is a Florida-based technical analyst, market researcher, educator and trader with 35+ years of experience. He is an expert in the area of patterns, price and time analysis as it applies to futures, Forex, and stocks.

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