U.S. Dollar Index (DX) Futures Technical Analysis – Needs to Hold 96.175 to Sustain Upside Momentum

The  U.S. Dollar is trading higher against a basket of major currencies late in the session on Tuesday after new U.S. producer price data released earlier in the day affirmed market expectations that the U.S. Federal Reserve will announce on Wednesday that it will quicken its withdrawal from bond purchases.

At 20:28 GMT, March U.S. Dollar Index futures are trading 96.515, up 0.243 or +0.25%. The Invesco DB US Dollar Index Bullish Fund ETF (UUP) is trading $25.89, up $0.06 or +0.21%.

Data from the Labor Department showed the producer price index (PPI) for final demand in the 12 months through November shot up 9.6%, clocking its largest gain since November 2010 and followed an 8.8% increase in October.

The Federal Reserve started its two-day meeting early Tuesday. On Wednesday, it is expected to signal a faster wind-down of asset purchases, and thus, a quicker start to interest rate hikes in order to contain the rapid rise in prices.

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart. A trade through 96.845 will signal a resumption of the uptrend. A trade through 93.810 will change the main trend to down.

The minor trend is also up. A trade through 95.500 will change the minor trend to down. This will shift momentum to the downside. A move through the minor top at 96.565 will indicate the buying is getting stronger after two weeks of sideways action.

The minor range is 96.845 to 95.500. The index is currently trading on the strong side of its 50% level at 96.175, making it support.

The short-term range is 93.810 to 96.845. Its 50% level at 95.320 is potential support.

The main range is 93.200 to 96.845. Its retracement zone at 95.025 to 94.590 is controlling the near-term direction of the market.

Short-Term Outlook

The direction of the March U.S. Dollar Index into the close and early Wednesday is likely to be determined by trader reaction to 96.175.

Bullish Scenario

A sustained move over 96.175 will indicate the presence of buyers. If this creates enough upside momentum then look for a test of the minor top at 96.565.

Taking out 96.565 will indicate the buying is getting stronger with the main top at 96.845 the next target. A move through this main top will reaffirm the uptrend with a long-term top at 97.120 the next major target price.

Bearish Scenario

A sustained move under 96.170 will signal the presence of sellers. The first downside target is 95.815. Taking out this level could extend the selling into 95.500.

A trade through 95.500 will change the minor trend to down. This will also shift momentum to the downside, followed by a pivot at 95.320.

If 95.320 fails as support then look for a break into the main support zone at 95.025 to 94.590. This is a value zone so look for new buyers on a test of this area.