U.S. Dollar Index (DX) Futures Technical Analysis – Overtaking 93.750 Could Trigger Acceleration into 94.070

The U.S. Dollar rose to its highest level since August 20 as rising U.S. government bond yields soared against the debt of other foreign countries on Tuesday.

U.S. Treasury yields have surged since the end of last week, after the Federal Reserve said it will likely begin reducing its monthly bond purchases as soon as November and hinted that interest rate hikes may follow as soon as 2022. Rising Treasury yields tend to make the U.S. Dollar a more attractive investment against other major currencies.

At 12:31 GMT, December U.S. Dollar Index futures are trading 93.640, up 0.260 or +0.28%.

The benchmark 10-year U.S. Treasury yield rose again on Tuesday, trading at its highest level since June. The yield on the benchmark 10-year Treasury note was up 5.5 basis points to 1.539%. The yield on the 30-year Treasury bond added 7.4 basis points, spiking to 2.069%.

In economic news, traders will be eyeing the remarks of Federal Reserve Chairman Jerome Powell when he testifies before Congress at 14:00 GMT.

Powell, in prepared remarks, warned that higher inflation may last longer than anticipated. He went on to say that economic growth has “continued to strengthen” but has been met with upward price pressures caused by supply chain bottlenecks and other factors.

“Inflation is elevated and will likely remain so in coming months before moderating,” Powell said.

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart. A trade through 93.710 will reaffirm the uptrend. A move through 92.970 will change the main trend to down.

The index is also trading on the strong side of a retracement zone at 93.030 to 92.825, making it support.

Daily Swing Chart Technical Forecast

The direction of the December U.S. Dollar Index into the close on Tuesday is likely to be determined by trader reaction to 93.380.

Bullish Scenario

A sustained move over 93.380 will indicate the presence of buyers. If this move continues to generate enough upside momentum then look for the buying to possibly extend into a pair of main tops at 93.710 and 93.750.

Look for some light selling on the first test of 93.710 – 93.750. Overcoming the latter, however, could trigger an acceleration to the upside with 94.07 the next likely target.

Bearish Scenario

A sustained move under 93.380 will signal the presence of sellers. If this move generates enough upside momentum then look for the selling to possibly extend into 93.030 to 92.970.

Side Notes

The Dollar Index is clearly being driven by the sharp rise in Treasury yields. We’re expecting the 10-year yield to continue to rise over the short-run with 1.57% the minimum target and 1.69% the main objective.