U.S. Dollar Index (DX) Futures Technical Analysis – Setting Up for Choppy Trade Between 93.770 – 92.940

The U.S. Dollar eased against a basket of major currencies on Wednesday after the U.S. Federal Reserve said it would begin unwinding its pandemic-era stimulus, but held to its belief that high inflation would prove “transitory” and likely not require a rapid rise in interest rates.

On Wednesday, December U.S. Dollar Index futures settled at 93.853, down 0.226 or -0.24%.

The Fed announced a $15 billion monthly cut to its $120 billion in monthly purchases of Treasuries and mortgage-backed securities, but did little to signal when it may begin the next phase of policy “normalization” by raising interest rates.

The dollar index retreated after the Fed statement, hitting a session low before reversing some of the losses. Traders said the initial sell-off was likely fueled by profit-taking.

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart, however, momentum has shifted to the downside. A trade through 94.410 will signal a resumption of the uptrend. A move through 93.265 will change the main trend to down.

On the upside, the nearest resistance is a 50% level at 94.020.

On the downside, potential support is layered so expect to see a labored break. Potential support levels include 93.770, 93.580, 93.430, 93.255, 93.160 and 92.940. The latter is a potential trigger point for an acceleration to the downside.

Daily Swing Chart Technical Forecast

The direction of the December U.S. Dollar Index early Thursday is likely to be determined by trader reaction to 93.770.

Bullish Scenario

A sustained move over 93.770 will indicate the presence of buyers. If this creates enough upside momentum then look for a surge into 94.020. Overtaking this level will indicate the buying is getting stronger with 94.410 the next likely target.

Bearish Scenario

A sustained move under 93.770 will signal the presence of sellers. This could trigger a break into 93.580. If this fails then look for the selling to possibly extend into 93.430.

Side Notes

Given the multiple retracement levels between 94.020 and 92.940, it looks as if the near-term trade is going to be choppy.