U.S. Dollar Index (DX) Futures Technical Analysis – Steep Break Puts 105.470 – 105.155 Value Zone on Radar

The U.S. Dollar is down sharply against a basket of major currencies at the mid-session on Tuesday amid expectations the Federal Reserve will be less aggressive at its upcoming meeting later this month. The index was also pressured as the Euro rose sharply, following reports that European Central Bank (ECB) policymakers are likely to discuss raising rates by 50 basis points when they meet on Thursday.

At 16:35 GMT, September U.S. Dollar Index futures are trading 106.505, down 0.725 or -0.68%. The Invesco DB US Dollar Index Bullish Fund ETF (UUP) is at $28.48, down $0.22 or -0.77%.

Reuters reported that ECB officials are considering a rate hike of 50 basis points on Thursday, instead of a 25-basis point move previously suggested by them.

In U.S. economic news, new U.S. home-building activity fell to a nine-month low in June and permits for new construction projects slipped as well, the latest indication of a cooling housing market as surging mortgage rates reduce affordability.

Housing starts fell to a seasonally adjusted annual rate of 1.559 million units last month, the lowest level since September 2021, the Commerce Department said on Tuesday. Building permits for single-family homes – an indicator of future construction – declined 8% to a rate of 967,000 units, the lowest since June 2020.

Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart, however, momentum is trending lower. A trade through 109.140 will signal a resumption of the uptrend. A move through 103.200 will change the main trend to down.

The minor trend is down. It turned down on Monday when sellers took out 107.270. This move shifted momentum to the downside.

The short-term range is 103.200 to 109.140. Its retracement zone at 106.170 to 105.470 is the next downside target and potential support area.

The intermediate range is 101.170 to 109.140. Its retracement zone at 105.155 to 104.215 is a more important support area.

The two retracement zones combine to form a support cluster at 105.470 to 105.155. Since the main trend is up, look for buyers to come in on a test of this area.

On the upside, the resistance is a long-term Fibonacci level at 107.780.

Daily Swing Chart Technical Forecast

Trader reaction to the short-term 50% level at 106.170 is likely to determine the direction of the September U.S. Dollar Index into the close on Tuesday.

Bullish Scenario

A sustained move over 106.170 will indicate the presence of buyers. If this move creates enough upside momentum then look for a surge into the long-term Fibonacci level at 107.780.

Bearish Scenario

A sustained move under 106.170 will signal the presence of sellers. If this generates enough downside momentum then look for the selling to possibly extend into the support cluster at 105.470 to 105.155. Look for buyers on the first test of this area.