U.S. Dollar Index (DX) Futures Technical Analysis – Risk Off Scenario Targets 97.730 to 98.240

The U.S. Dollar finished higher against a basket of major currencies on Friday, following the release of mixed U.S. labor reports. Essentially, the better than expected U.S. Non-Farm Payrolls report was bearish for the dollar because it dampened its appeal as a safe-haven asset. However, a component of the Weekly Initial Claims report was perceived as bullish, sending investors into the safety of the greenback.

On Thursday, the September U.S. Dollar Index settled at 97.301, +0.146 or +0.15%.

The U.S. Dollar rose on Thursday as more traders began to doubt the longevity of non-farm payroll gains amid persistent unemployment claims and a spike in coronavirus cases. In other words, the Non-Farm Payrolls report represented the past, and the initial claims report is forward-looking. Investors don’t care anymore about the economy in June, they want to know where it’s headed in July.

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 June 30.

A trade through 97.810 will negate the closing price reversal top and signal a resumption of the uptrend. The main trend will change to down on a move through the last swing bottom at 96.320.

The minor range is 95.570 to 97.810. Its 50% retracement level at 96.690 is support.

The short-term range is 99.885 to 95.570. Its retracement zone at 97.730 to 98.240 is resistance. It stopped the rally last week at 97.810.

Short-Term Outlook

The index closed inside a pair of 50% levels at 96.690 and 97.730. Trader reaction to these levels will determine the near-term direction of the dollar index.

The market is also being driven by the headlines. Bearish news about the economy is likely to generate the upside momentum needed to take out the 50% level at 97.730 along with the main top at 97.810 and the Fibonacci level at 98.240.

A bullish outlook for the economy is likely to drive the index through the 50% level at 96.690 and the last main bottom at 96.320.

For a look at all of today’s economic events, check out our economic calendar.