U.S. Dollar Index (DX) Futures Technical Analysis – Reverses Down as Investors Bet on Dovish Fed

After a promising start to the day, the U.S. Dollar reversed course late in the session and is now trading lower against a basket of major currencies. The selling pressure is being led by a strong upward surge in the Euro. The Canadian Dollar is also making a comeback along with the British Pound. The Japanese Yen has been strong all session as traders raise their bets that the Federal Reserve will target flattening the yield curve in Wednesday’s policy announcements.

At 19:06 GMT, June U.S. Dollar Index futures are trading 96.310, down 0.298 or -0.31%.

The Federal Open Market Committee (FOMC) meets Tuesday and will announce its latest monetary policy decision on Wednesday at 18:00 GMT. While markets expect short-term interest rates to remain steady at near zero, investors will be watching Fed Chairman Jerome Powell’s statement for clues over the central bank’s next move.

The weak price action in the U.S. Dollar against a basket of major currencies lately has been driven by investors shedding safe-haven assets as they continue to bet on a fast recovery by the U.S. economy. May’s surprise strength in the U.S. Non-Farm Payrolls report supports this notion.

Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart. The downtrend was reaffirmed on Tuesday when sellers took out Friday’s closing price reversal bottom at 96.430.

The minor trend is also down. A trade through 97.065 will change the minor trend to up. This will also shift momentum to the upside.

The main range is 94.530 to 103.960. Its retracement zone at 98.130 to 99.245 is controlling the longer-term direction of the index. It is also resistance.

Short-Term Outlook

The price action suggests the Fed will deliver a dovish message for interest rates. Furthermore, some bearish traders are also suggesting central bank policymakers are going to announce that they are targeting the yield curve.

Last week, Treasury yields surged higher which drew the attention of the Fed. They may announce their intention to flatten the yield curve, which would be bearish for the U.S. Dollar Index.