Advertisement
Advertisement

U.S. Dollar Index Forecast: DXY Strengthens Over 102.440, Weakens Under 101.815

By:
James Hyerczyk
Updated: May 24, 2022, 08:39 UTC

Trader reaction to 102.440 will determine the direction of the June U.S. Dollar Index on Tuesday.

US Dollar Index

In this article:

The U.S. Dollar is trading flat early Tuesday after dropping the previous session against most of its major peers. The catalysts behind yesterday’s pressure were improving risk sentiment amid potential easing of lockdowns in China, President Biden’s remarks that he is likely to drop Trump-era trade tariffs on China and expectations of an earlier-than-expected rate hike by the European Central Bank (ECB).

At 01:19 GMT, June U.S. Dollar Index futures are trading 102.215, up 0.118 or +0.12%. On Monday, the Invesco DB US Dollar Index Bullish Fund ETF (UUP) settled at $27.29, down $0.25 or -0.91%.

A rebound in U.S. stock markets following last week’s sell-off helped improve investor sentiment as worries over an economic slowdown were dampened by positive news out of China.

According to reports, China’s financial hub of Shanghai moved ahead with plans to resume part of its transportation network, taking another step towards the lifting of all its COVID-19 restrictions around June 1.

President Biden announced that trade tariffs imposed on China by the previous Trump administration will be reviewed after discussing with Treasury Secretary Janet Yellen.

Finally, the Euro rallied against the U.S. Dollar after ECB President Christine Lagarde said policymakers would likely lift interest rates out of negative territory by September.

Daily June U.S. Dollar Index

Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart. The trend turned down on Monday when sellers took out the last main bottom at 102.375. A trade through 105.065 will change the main trend to up.

Despite the downtrend, Tuesday marks the seventh day down from the last main top, which puts it inside the window of time for a closing price reversal bottom.

The short-term range is 99.810 to 105.065. The market is currently testing its retracement zone at 102.440 to 101.815.

The main range is 97.730 to 105.065. Its retracement zone at 101.400 to 100.530 is the support zone controlling the near-term direction of the index.

The combination of the two retracement zones creates an important support cluster at 101.815 – 101.400.

The minor range is 105.065 to 102.045. Its 50% level is the nearest resistance at 103.555. This level will move down if the selling extends through 102.045.

Daily Swing Chart Technical Forecast

Trader reaction to 102.440 will determine the direction of the June U.S. Dollar Index on Tuesday.

Bullish Scenario

A sustained move over 102.440 will indicate the presence of buyers. If this move is able to generate enough upside momentum then look for a possible surge into the pivot at 103.555.

Bearish Scenario

A sustained move under 102.440 will signal the presence of sellers. The first downside target is 101.815, followed by 101.400. The latter is a potential trigger point for an acceleration to the downside with 100.530 the next major target.

Side Notes

Taking out 102.045 then closing higher for the session will produce a potentially bullish closing price reversal bottom. If confirmed, this could trigger the start of a 2 to 3 day counter-trend rally.

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

About the Author

James is a Florida-based technical analyst, market researcher, educator and trader with 35+ years of experience. He is an expert in the area of patterns, price and time analysis as it applies to futures, Forex, and stocks.

Did you find this article useful?

Advertisement