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

The U.S. Dollar is trading nearly flat against a basket of major currencies early Tuesday, but remains within striking distance of its three-week high reached 10 sessions ago. Last week, the index posted its biggest weekly rise in six weeks as traders liquidated their short positions before a much-anticipated U.S. Federal Reserve meeting that might signal a change in the outlook for U.S. monetary policy.

At 13:42 GMT, September U.S. Dollar Index futures are trading 90.470, down 0.018 or -0.02%.

The Fed begins a scheduled two-day policy meeting on Tuesday. Nearly 60% of economists in a Reuters poll said a much-anticipated taper announcement will come in the next quarter, despite a patchy recovery in the job market.

While consensus expectations are the Fed will remain on hold until 2023, some believe the failure of the dollar to weaken in recent days despite inflation-adjusted U.S. bond yields softening further signals a broader caution among investors.

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart. A trade through 90.625 will signal a resumption of the uptrend. A trade through 89.795 will change the main trend to down.

The minor range is 89.545 to 90.625. Its retracement zone at 90.085 to 89.960 is support.

The short-term range is 91.410 to 89.545. Its retracement zone at 90.480 to 90.700 is acting like resistance. It’s also a potential trigger point for an acceleration to the upside.

The main range is 93.430 to 89.545. A breakout over 90.700 could lead to a test of its 50% level at 91.490.

Daily Swing Chart Technical Forecast

The direction of the September U.S. Dollar Index on Tuesday 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 lead to a quick test of the main top at 90.625 and the short-term Fibonacci level at 90.700. Overcoming this level could lead to a test of the next main top at 90.910. Taking out this level could trigger a surge into 91.410 to 91.490.

Bearish Scenario

A sustained move under 90.480 will signal the presence of sellers. If this attracts enough sellers then look for a break into the minor retracement zone at 90.085 to 89.960.