U.S. Dollar Index (DX) Futures Technical Analysis – Strong Upside Momentum Puts 94.570 – 94.740 on the Radar

The U.S. Dollar is trading near a 2-1/2 week high against a basket of major currencies early Monday as rapidly rising inflation in the United States boosted the case for earlier Federal Reserve interest rate hikes.

The U.S. Federal Reserve holds a two-day monetary policy meeting November 2-3 with the Federal Open Market Committee (FOMC) widely expected to announce a tapering of stimulus on Wednesday. However, investors are hoping for clues as to the timing of the first interest rate hike and possibly others.

At 06:29 GMT, December U.S. Dollar Index futures are trading 94.145, up 0.024 or +0.03%.

A 4.4% surge in the government’s index of core personal consumption expenditures – the Fed’s preferred inflation measure – solidified market expectations for a rate hike around the middle of 2022.

Following the release of the data, futures on the Fed Funds rate, which track short-term rate expectations, priced in a 90% chance of quarter-point tightening by June 2022, factoring in another rate increase by December.

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart. A trade through 94.300 will signal a resumption of the uptrend. A move through 93.265 will change the main trend to down.

The short-term range is 94.570 to 93.265. Its 50% level at 94.020 is the first support.

Another short-term range is 92.970 to 94.570. Its retracement zone at 93.770 to 93.580 is another potential support area.

Daily Swing Chart Technical Forecast

The direction of the December U.S. Dollar Index on Monday is likely to be determined by trader reaction to 94.120.

Bullish Scenario

A sustained move over 94.120 will indicate the presence of buyers. If this creates enough upside momentum then look for a retest of 94.300. Taking out this level will indicate the buying is getting stronger. This would put the index on course for a near-term test of 94.570 to 94.740.

Bearish Scenario

A sustained move under 94.120 will signal the presence of sellers. If this generates enough downside momentum then look for a labored break with potential downside targets lined up at 94.020, 93.770 and 93.580.