U.S. Dollar Index (DX) Futures Technical Analysis – Strengthens Over 94.390, Weakens Under 94.340

The U.S. Dollar soared against a basket of major currencies on Thursday, bouncing back from the previous session’s setback after the Federal Reserve repeated it saw high inflation as transitory. The dollar was particularly strong against the heavily weighted Euro and British Pound. The Sterling was pressured after the Bank of England unexpectedly kept interest rates on hold.

On Thursday, December U.S. Dollar Index futures settled at 94.341, up 0.488 or +0.52%.

The Fed announced on Wednesday a $15 billion monthly cut to its $120 billion in monthly purchases of Treasuries and mortgage-backed securities, but Chairman Jerome Powell said he was in no rush to hike borrowing costs.

The Euro remained under pressure against the dollar with the European Central Bank (ECB) seemingly far behind the Fed in tightening.

The British Pound fell after the Bank of England kept rates on hold, disappointing investors who had priced in a rate hike. Policymakers are having a hard time trying to balance the fight against inflation without compromising the economic recovery.

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart. The uptrend was reaffirmed on Thursday when buyers took out the previous main top at 94.410. A trade through 94.470 on Friday will signal a resumption of the uptrend. A move through 93.800 will change the main trend to down.

The nearest support is a 50% level at 94.020. This is followed by a retracement zone at 93.770 to 93.580.

Daily Swing chart Technical Forecast

The direction of the December U.S. Dollar Index early Friday will be determined by trader reaction to 94.390 and 94.340.

Bullish Scenario

A sustained move over 94.390 will indicate the presence of buyers. If this creates enough upside momentum then look for a surge into 94.570. Overtaking this level could extend the rally into the September 25, 2020 main top at 94.740.

The main top at 94.740 is a potential trigger point for an acceleration to the upside with 96.500 the next major upside target.

Bearish Scenario

A sustained move under 94.340 will signal the presence of sellers. If this move creates enough downside momentum then look for the selling to possibly extend into 94.020. If this fails then look for a further break into the main bottom at 93.800.