U.S. Dollar Index (DX) Futures Technical Analysis – Reaction to Test of 93.800 Early Wednesday Sets Tone

The U.S. Dollar retreated against a basket of major currencies on Tuesday as investors awaited consumer inflation data (CPI) on Wednesday that will be the next major indicator of whether rising price pressures are accelerating. Furthermore, it could influence Fed policy in the form of a sooner-than-expected rate hike.

At 21:13 GMT, December U.S. Dollar Index futures are trading 93.960, down 0.082 or -0.09%.

In economic news, the government reported on Tuesday that U.S. producer prices increased solidly in October, indicating that high inflation could persist for a while amid tight supply chains related to the pandemic.

Also on Tuesday, Fed officials said it is not clear that high inflation will become more entrenched than previously expected.

Looking ahead to Wednesday, Economists polled by Reuters see monthly CPI accelerating to 0.4% from the previous month’s 0.2% rise, with the closely watched year-on-year core measure gaining 0.3 percentage point to 4.3%, well above the Fed’s average annual 2% inflation target.

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart, however, momentum shifted to the downside with the confirmation of Monday’s closing price reversal top.

A trade through 94.645 will negate the closing price reversal top and signal a resumption of the uptrend. A move through 93.800 will change the main trend to down.

The minor range is 93.800 to 94.645. Its retracement zone at 94.125 to 94.225 is resistance.

The next downside target is the short-term retracement zone at 93.810 to 93.610. This is followed by additional 50% levels at 93.470 and 93.290.

Daily Swing Chart Technical Forecast

The direction of the December U.S. Dollar Index early Wednesday will be determined by trader reaction to 94.125.

Bullish Scenario

A sustained move over 94.125 will indicate the presence of buyers. This could trigger a quick rally into 94.225. If the market is headed lower, this price should stop the rally. If the market is headed higher then buyers will overcome this level and the market could accelerate into 94.645 to 94.740.

Bearish Scenario

A sustained move under 94.125 will signal the presence of sellers. If this creates enough downside momentum then look for an early test of the support cluster at 93.800.

Since the trend is up, buyers could come in on the first test of 93.800. If this level fails as support then look for the selling to possibly extend into 93.610, followed by 93.470.