U.S. Dollar Index (DX) Futures Technical Analysis – Strengthens Over 91.950, Weakens Under 91.850

The U.S. Dollar is trading lower against a basket of major currencies with most of the selling pressure being fueled by the firm Japanese Yen and Swiss Franc. Both are up 0.20% and 0.24%, respectively. The heavily-weighted Euro is up 0.11%.

Lower yields are helping to make the U.S. Dollar a less-attractive investment as traders seek safety in Treasurys due to fears of a coming disappointment in economic growth.

At 12:35 GMT, September U.S. Dollar Index futures are trading 91.935, down 0.130 or -0.14%.

An overbought dollar has become one major concern for traders. Dollar net long positions rose to their highest level since early March of last year in the week to July 27, according to Reuters calculations and the latest data from the Commodity Futures Trading Commission.

The current liquidation move suggests traders could be making room for the next rally, but first the market has to clear out the weaker longs.

Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart. However, the selling pressure stopped on Friday with the formation of a potentially bullish closing price reversal bottom.

A trade through 91.780 will negate the closing price reversal bottom and signal a resumption of the downtrend.

A move through 92.215 will confirm the closing price reversal bottom. This could trigger the start of a 2 to 3 day retracement.

Traders are trying to establish support at a pair of retracement zones at 91.950 and 91.850.

On the downside, the next potential target area is 91.490 and 91.370.

On the upside, the next likely target is a long-term Fibonacci level at 92.495.

Daily Swing Chart Technical Forecast

The direction of the September U.S. Dollar on Tuesday is likely to be determined by trader reaction to 91.950 and 91.850.

Bullish Scenario

A sustained move over 91.950 will indicate the presence of buyers. If this move is able to generate enough upside momentum then look for a possible 2 to 3 day rally into 92.495.

Bearish Scenario

A sustained move under 91.85 will signal the presence of sellers. The first target is 91.780. Taking out this level could trigger a further break into 91.490 to 91.370.