U.S. Dollar Index (DX) Futures Technical Analysis – Strengthens Over 90.700, Weakens Under 90.470

The U.S. Dollar is trading flat, but hovering near a one-month high against a basket of currencies on Wednesday as investors tried to gauge if the Federal Reserve might alter the language on its stimulus following a recent jump in U.S. inflation.

The Fed is widely expected to acknowledge the first conversations among its policymakers about when and how fast to pare back the massive bond-buying program launched in 2020 when it concludes a policy meeting later in the day at 18:00 GMT.

At 04:09 GMT, June U.S. Dollar Index futures are trading 90.505, up 0.003 or +0.00%.

Although most investors think the Fed will refrain from any hints of starting tapering its stimulus in the near future, the U.S. Dollar could rally if the central bank drops any hint that tapering will be brought forward or rate hikes are going to be looked at sooner.

If the Fed continues to reiterate that inflation is transitory and that it will refrain from any changes in policy until the labor market improves, today’s Fed announcements could turn into a non-event.

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart. A trade through 90.640 will reaffirm the uptrend. A move through 89.795 will change the main trend to down.

The minor trend is also up. A trade through 90.310 will change the minor trend to down. This will also shift momentum to the downside.

The minor range is 89.545 to 90.640. Its retracement zone at 90.095 to 89.965 is potential support.

The short-term range is 91.410 to 89.545. Its retracement zone at 90.480 to 90.700 is currently being tested. Trader reaction to this area could determine the near-term tone of the market.

The main range is 93.430 to 89.545. If there is a breakout over 90.700 then its 50% level at 91.490 will become the next upside target.

Daily Swing Chart Technical Forecast

The direction of the September U.S. Dollar Index on Wednesday is likely to be determined by trader reaction to the short-term 50% level at 90.480.

Bullish Scenario

A sustained move over 90.480 will indicate the presence of buyers. This could trigger a quick surge into 90.640 to 90.700.

Taking out 90.700 will indicate the buying is getting stronger. This could extend the rally into the next main top at 90.910. This price is a potential trigger point for an acceleration to the upside with the next major target a potential resistance cluster at 91.410 to 91.490.

Bearish Scenario

A sustained move under 90.480 will signal the presence of sellers. This could trigger an acceleration to the downside with 90.095 to 89.965 the next likely target. Buyers could come in on the first test of this area, but if it fails then look for the selling to possibly extend into the main bottom at 89.795.