James Hyerczyk
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US Dollar Index

The U.S. Dollar is inching lower early Friday after surging into its highest level since April 13 the previous session. Although the greenback is headed for its best weekly performance in nearly nine months, the early price action suggests some investors may be lightening up on the long side due to technical factors. The market is currently testing 50% of the contract range, which is considered a natural selling area, but also the trigger point for an acceleration to the upside.

At 04:47 GMT, September U.S. Dollar Index futures are trading 91.840, down 0.033 or -0.04%.

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The index is being underpinned by the Fed’s announcement of a sooner-than-expected ending to extraordinary U.S. monetary stimulus. The surprise shift in tone from the central bank is expected to provide longer-term support, while short-term volatility is likely to be fueled by Treasury yields.

Rising yields should be supportive for the dollar index, while falling yields are likely to cap gains.

Daily September U.S. Dollar Index

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart. A trade through 91.995 will signal a resumption of the uptrend. A move through 89.795 will change the main trend to down. This is highly unlikely, but due to the prolonged move in terms of price and time, the index may be ripe for a short-term closing price reversal top. This won’t change the trend to down, but if confirmed, it could fuel the start of a 2 to 3 day correction.

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

The resistance is the future contract’s retracement zone at 91.850 to 92.495. The index is currently testing the lower or 50% level of this range at 91.850.

The main range is 93.430 to 89.545. Its retracement zone is 91.490 to 91.950.

The combination of these two zones forms a resistance cluster at 91.850 to 91.950. The index is currently testing this area.


Daily Swing Chart Technical Forecast

Trader reaction to the resistance cluster at 91.850 to 91.950 should determine the direction of the September U.S. Dollar Index on Friday.

Bullish Scenario

A sustained move over 91.950 will signal the presence of buyers. Taking out 91.995 will reaffirm the uptrend. If this move creates enough upside momentum then we could see an acceleration into the Fibonacci level at 92.495.

Bearish Scenario

A sustained move under 91.850 will indicate the presence of sellers. If this move generates enough downside momentum then look for a possible break into the main 50% level at 91.490. Watch for a technical bounce on the first test of this level. If it fails, however, then prepare for an even further decline with 90.770 – 90.480 the next potential target.

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