U.S. Dollar Index (DX) Futures Technical Analysis – Strengthens Over 92.310, Weakens Under 91.705

The U.S. Dollar soared on Friday after a government report showed jobs growth came in above expectations in February. The news helped drive the benchmark 10-year Treasury yield into a one-year high of 1.625%, before pulling back to 1.577 into the close.

The data backed up the view of Federal Reserve officials including Federal Reserve Chairman Jerome Powell who have said that a recent rise in U.S. government bond yields is justified by an improving economic outlook.

The jobs improvement came amid falling new COVID-19 cases, quickening vaccination rates and additional pandemic relief money from the government, putting the labor market recovery back on firmer footing and on course for further gains in the months ahead.

On Friday, March U.S. Dollar Index futures settled at 91.990, up 0.346 or +0.38%.

Big Decision on Monday

Over the weekend, the U.S. Senate passed a $1.9 trillion coronavirus relief package on Saturday as Democrats rush to send out a fresh round of aid.

This news will be the source of volatility on Monday because there are two ways to play the story.

Bullish traders will read the news as driving the economic recovery at an even faster pace on top of Friday’s bullish jobs data. If this drives up Treasury yields then look for demand for the dollar to strengthen.

Bearish traders will view the story as weak for the U.S. Dollar. A drop in yields will help drive the greenback lower.

It’s a tough call because the story has been in the news for months. We won’t really know how traders feel about it until we see what bond yields do. However, if Friday’s price action is any indication, yields should fall, stocks should rise and the dollar weaken.

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart. A trade through 92.225 will signal a resumption of the uptrend with 92.730 the next key target price.

A trade through 89.675 will change the main trend to down. This is not likely, but price and time have put the index in a position to form a potentially bearish closing price reversal top.

The minor trend is also up. A trade through 90.635 will change the minor trend to down and shift momentum to the downside.

The main range is 94.250 to 89.165. The index is currently testing the top end of its retracement zone at 91.705 to 92.310. This zone is controlling the longer-term direction of the index.

The minor range is 89.675 to 92.225. Its 50% level at 91.430 is the first downside target.

The short-term range is 89.165 to 92.225. Its retracement zone at 90.695 to 90.335 is the next key support area.

Short-Term Outlook

Friday’s price action suggests the direction of the March U.S. Dollar Index on Monday will be determined by trader reaction to 92.310.

Bullish Scenario

A sustained move over 92.310 will indicate the presence of buyers. This could create the upside momentum needed to challenge the November 23 main top at 92.370. This is potential resistance and trigger point for an acceleration into the November 11 main top at 93.165.

Bearish Scenario

A sustained move under 92.300 will signal the presence of sellers. The first downside target is the main 50% level at 91.705. This is followed by the minor 50% level at 91.430. This is a potential trigger point for an acceleration into the short-term retracement zone at 90.695 to 90.335.

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