U.S. Dollar Index (DX) Futures Technical Analysis – Rangebound; Strenthens Over 96.355, Weakens Under 96.195

The U.S. Dollar is inching higher against a basket of major currencies early Wednesday as traders reacted to a dimming in demand for higher-risk assets. This movement is being fueled by a reversal to the downside by U.S. stock index futures the previous session. However, traders shouldn’t read too much into this week’s two-sided trading due to holiday-thinned volume.

At 07:22 GMT, March U.S. Dollar Index futures are trading 96.230, up 0.027 or +0.03%. On Tuesday, the Invesco DB US Dollar Index Bullish Fund ETF (UUP) settled at $25.77, up $0.03 or +0.12%.

According to a report, the dollar turned around on Tuesday on speculation rising inflation would force the Federal Reserve to make its first rate hike in March or shortly after it ends its tapering of monetary stimulus.

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart, however, momentum has been trending lower since the formation of the closing price reversal top on December 15.

A trade through 96.895 will negate the closing price reversal top and signal a resumption of the uptrend. Taking out the main bottom at 95.500 will change the main trend to down.

The minor trend is also up. A trade through the minor bottom at 95.970 will change the minor trend to down. This will confirm the shift in momentum.

The short-term range is 95.500 to 96.895. The index is currently straddling its pivot at 96.200.

The minor range is 96.895 to 95.810. Its pivot at 96.355 is the next likely upside target. This level could act like resistance on the first test, or as a trigger point for an acceleration to the upside.

On the downside, the nearest support is a pivot at 95.360. This is followed by the main support zone at 95.050 to 94.610.

Daily Swing Chart Technical Forecast

The direction of the March U.S. Dollar Index on Wednesday is likely to be determined by trader reaction to 96.200.

Bullish Scenario

A sustained move over 96.200 will indicate the presence of buyers. This should trigger a quick move into 96.355. If this surge creates enough upside momentum then look for an acceleration to the upside with the first target a minor top at 96.670, followed by a main top at 96.895.

Bearish Scenario

A sustained move under 96.150 will signal the presence of sellers. The first downside target is a minor bottom at 95.970, followed by another minor bottom at 95.81. The latter is a potential trigger point for an acceleration into the main bottom at 95.500 and the 50% level at 95.360.

Side Notes

Volume is expected to be light so be careful buying strength and selling weakness.