U.S. Dollar Index (DX) Futures Technical Analysis – Needs to Stay Under 95.770 to Sustain Downside Momentum

The U.S. Dollar is trading lower against a basket of major currencies on Tuesday as optimism over new stimulus from U.S. lawmakers and increased demand for risk assets dampened the currency’s appeal as a safe-haven asset. The greenback is also being pressured by positive movement toward a coronavirus vaccine and the European Union’s passing of a massive stimulus plan.

At 13:35 GMT, the September U.S. Dollar Index is trading 95.645, down 0.127 or -0.13%.

A rise in the Euro exerted the most pressure since it is the most heavily-weighted currency in the calculation of the index. The single-currency jumped to its highest level since March 9 in Asian trading hours before settling back. Gains were tempered by prior market expectations that a deal would eventually be agreed and the Euro’s recent run higher as the recovery fund was negotiated.

In other news, the British Pound rallied above $1.27 for the first time in six weeks on Tuesday. The U.S. Dollar also lost ground to the Canadian Dollar, and the safe-haven Japanese Yen and Swiss Franc.

Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart. The down trend was reaffirmed when sellers took out the June 10 bottom at 95.570.

The main trend will change to up on a move through 97.810. This is highly unlikely, but due to the prolonged move down in terms of price and time, the index is trading inside the window of time for a closing price reversal bottom. With the downside momentum strong, this should be the only concern for short-sellers.

The minor trend is also down. A trade through 96.380 will change the minor trend to up. This will shift momentum back to the upside.

Daily Swing Chart Technical Forecast

Look for a strong downside bias as long as the September U.S. Dollar Index remains under yesterday’s close at 95.770. If this continues to create enough downside momentum then look for the selling to possibly extend over the near-term to the March 9 bottom at 94.670.

Overtaking 95.770 will indicate the selling is getting weaker, or the counter-trend buying stronger. This could trigger an intraday short-covering rally.

A close over 95.770 will form a potentially bullish closing price reversal bottom. If confirmed, this could lead to a 2 to 3 day counter-trend rally.

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