U.S. Dollar Index (DX) Futures Technical Analysis – Next Two Downside Targets 89.230 and 88.940

The U.S. Dollar tumbled against a basket of major currencies on Tuesday in a move that was fueled by China’s decision to lift its official Yuan exchange rate by its highest margin since it abandoned a dollar peg in 2005. The news helped lift risk currencies, while putting the dollar back on its downward path, erasing the gains from its impressive rebound rally on Monday.

On Tuesday, March U.S. Dollar Index futures settled at 89.409, down 0.436 or -0.49%.

The Euro was up 0.38%, while the Japanese Yen strengthened by 0.42%. The Sterling gained 0.45%, having been whipsawed by a surge in infections of a fast-spreading new coronavirus variant in the U.K., with the government calling for a third national lockdown in an effort to curb the spread.

The next major move by the U.S. Dollar is likely to be determined by the Georgia runoffs. A Democratic victory in both races could take control of the Senate away from Republicans, paving the way for further stimulus measures as well as higher corporate taxes and more regulation. All of which are likely to increase U.S. debt levels, which would put further pressure on the greenback.

Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart. A trade through 89.390 will signal a resumption of the downtrend. The main trend will change to up on a move through 92.730.

Due to the prolonged move down in terms of price and time, the dollar is inside the window of time for a potentially bullish closing price reversal bottom. This won’t change the main trend to up, but it could trigger the start of a strong 2 to 3 day short-covering rally.

The minor trend is also down. A trade through 89.965 will change the minor trend to up. This will also shift momentum to the upside.

The minor range is 91.150 to 89.390. Its 50% level at 90.270 is the first potential upside target.

Daily Swing Chart Technical Analysis

Trader reaction to 89.390 should set the tone on Wednesday.

Bearish Scenario

Taking out 89.390 will indicate the presence of sellers. This should lead to a quick test of the April 17, 2018 main bottom at 89.230. This is a potential trigger point for a further break into the March 27, 2018 main bottom at 88.940. If this level fails then look for a possible acceleration into the February 16, 2018 main bottom at 88.250.

Bullish Scenario

Holding above 89.390 will indicate the presence of buyers. Also taking out this level then turning higher for the session will put the index in a position to post a potentially bullish closing price reversal bottom.