U.S. Dollar Index (DX) Futures Technical Analysis – Safe-Haven Liquidation Pressures Greenback

The U.S. Dollar is trading lower against a basket of major currencies late Friday as a rally in equities contributed to a risk-on tone, encouraging those who bought the greenback earlier in the week for safe-haven protection, to lighten up on the long side.

Generating the biggest impact on the U.S. Dollar was a technical bounce by the Euro. The common currency edged off five-year lows to rise back above $1.04 on Friday. Nonetheless, it is headed for a big weekly loss after Russia’s decision to restrict gas supplies to Europe renewed fears about an economic slowdown in the Euro Zone.

In economic news, the dollar showed little reaction on Friday to data showing U.S. import prices were unexpectedly flat in April as a decline in petroleum costs offset gains in food and other products, a further sign that inflation has probably peaked.

Other data from the University of Michigan showed its preliminary reading of consumer sentiment for early May deteriorated to its lowest level since August 2011 as concerns about inflation persisted.

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart. A trade through the intraday high at 105.065 will signal a resumption of the uptrend. A move through 102.375 will change the main trend to down.

The minor trend is also up. A trade through 103.405 will change the minor trend to down. This will shift momentum to the downside.

The first minor range is 103.405 to 105.065. Its 50% level or pivot at 104.235 is the first support. The second minor range is 102.375 to 105.065. Its 50% level at 103.720 is another support level.

Short-Term Outlook

The direction of the June U.S. Dollar Index into the close on Friday will be determined by trader reaction to 104.780.

Bullish Scenario

A sustained move over 104.780 will indicate the presence of buyers. If this creates enough late session momentum then look for the rally to possibly lead to a retest of the intraday high at 105.065.

Bearish Scenario

A sustained move under 104.780 will signal the presence of sellers. If this generates enough downside momentum into the close then look for the selling to possibly extend into the pivot at 104.235. Taking out this level will indicate the selling pressure is getting stronger with 103.720 the next target.