U.S. Dollar Index (DX) Futures Technical Analysis – Strong Euro Capping Gains from Weaker Japanese Yen

The U.S. Dollar is edging higher against a basket of major currencies on Wednesday in a mostly lackluster trade. The greenback is trying to recover from yesterday’s technical closing price reversal top that was fueled by a sudden drop in U.S. Treasury yields.

At 10:12 GMT, June U.S. Dollar Index futures are trading 102.525, up 0.200 or +0.20%. On Tuesday, the Invesco DB US Dollar Index Bullish Fund ETF (UUP) settled at $27.34, down $0.02 or -0.09%.

The index is tracking a slight rise in Treasury yields on Wednesday, but gains are being capped by a firm Euro. The single-currency is being supported by the prospect of a hawkish European Central Bank (ECB).

On Thursday, the ECB is widely expected to announce an end to bond purchases this month, which would pave the way to a first interest rate hike in 11 years in July.

Helping to support the dollar index is a weaker Japanese Yen. The Dollar/Yen Forex pair hit a 20-year peak of 133.47 yen, with the Japanese currency losing around 5% versus the greenback in the past eight trading sessions.

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart. A trade through 102.850 will signal a resumption of the uptrend. A move through 101.660 will change the main trend to down.

The short-term range is 105.065 to 101.420. Its 50% level at 103.245 is the next upside target.

The intermediate range is 99.810 to 105.065. The index is current trading on the strong side of its retracement zone at 102.435 to 101.815, making it support.

The main range is 97.73 to 105.065. Its retracement zone at 101.395 to 100.530 is controlling the near-term direction of the index.

Daily Swing Chart Technical Forecast

Trader reaction to 102.440 is likely to determine the direction of the June U.S. Dollar Index on Wednesday.

Bullish Scenario

A sustained move over 102.440 will indicate the presence of buyers. The first upside target is 102.850.

Taking out 102.850 will indicate the buying is getting stronger with 103.245 the next target. This is a potential trigger point for an acceleration to the upside.

Bearish Scenario

A sustained move under 102.435 will signal the presence of sellers. This could trigger a sharp break into a series of potential support levels at 101.815, 101.660 and 101.395.