U.S. Dollar Index (DX) Futures Technical Analysis – Sellers Eyeing 107.780 – 107.650

The U.S. Dollar is edging lower against a basket of major currencies on Friday on profit-taking after posting a 24-year high earlier in week. The price action indicates the greenback is also headed for its first weekly loss in four weeks. Traders are saying the hawkish rate hike from the European Central Bank (ECB) is lifting the Euro, while putting pressure on the heavily-weighted U.S. Dollar Index.

At 05:14 GMT, September U.S. Dollar Index futures are trading 108.990, down 0.723 or -0.66%. On Thursday, the Invesco DB US Dollar Index Bullish Fund ETF (UUP) settled at $29.39, up $0.05 or +0.17%.

ECB Remarks Outweigh Fed Comments

Federal Reserve Chair Jerome Powell didn’t surprise anyone at the Cato Institute conference on Thursday when he reaffirmed the central bank’s aggressive stance against inflation. However, the ECB was surprising hawkish in promising further hikes after raising its key interest rate by an unprecedented 75 bps on Thursday.

Looking ahead…

There’s not much on the data front on Friday with FOMC Members George and Wallers scheduled to speak at 16:00 GMT before they move into the blackout period ahead of the Fed’s September 20-21 policy meeting.

Most traders are now positioning themselves ahead of the U.S. consumer inflation report next Tuesday, where the expectations are for a softer headline print. This may be one of the other reasons for the dollar’s weakness.

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart. However, the momentum shifted to the downside on Thursday, following the confirmation of Wednesday’s closing price reversal top.

A trade through 110.785 will negate the closing price reversal top and signal a resumption of the uptrend. A move through 107.480 will change the main trend to down.

The minor trend is also up. A trade through 108.235 will change the minor trend to down. This will confirm the shift in momentum.

The minor range is 107.480 to 110.785. The index is currently trading on the weak side of its pivot at 109.135, making it resistance.

On the downside, the first target is the long-term Fibonacci level at 107.780, followed by a minor 50% level at 107.650. These are the last potential support levels before the 107.480 main bottom.

Daily Swing Chart Technical Forecast

Trader reaction to the pivot at 109.135 is likely to determine the direction of the September U.S. Dollar Index on Friday.

Bearish Scenario

A sustained move under 109.130 will indicate the presence of sellers. If this move creates enough downside momentum then look for a pullback into the support cluster at 107.780 to 107.650.

Bullish Scenario

A sustained move over 109.135 will signal the presence of buyers. The first upside target is a minor pivot at 109.760. Overcoming this level will be a sign of strength with 110.785 the next target.

Side Notes

A close under 109.510 will form a potentially bearish weekly closing price reversal top. If confirmed, this could trigger the start of a 2 to 3 week correction.