U.S. Dollar Index (DX) Futures Technical Analysis – Struggling as Investors Seek Fed Rate Hike Clarity

The U.S. Dollar is trading flat against a basket of major currencies on Tuesday as traders look for guidance following its biggest rally in two weeks the previous session. Today’s early price action is essentially mirroring the movement in U.S. Treasury yields.

At 12:44 GMT, December U.S. Dollar Index futures are trading 105.275, up 0.036 or +0.03%. On Monday, the Invesco DB US Dollar Index Bullish Fund ETF (UUP) settled at $28.45, up $0.22 or +0.78%.

U.S. Treasury yields fell slightly on Tuesday, capping the dollar’s gains as investors fretted over the Federal Reserve’s interest rate policy path after economic data suggested rates may need to stay higher for longer than expected.

Recent economic data releases have indicated that the U.S. economy has remained robust as the Fed has hiked interest rates.

The strength in the U.S. labor market combined with solid services sector growth have some investors believing that this resilience could mean that the central bank needs to hike rates further, or keep them at a higher level for longer, in order to lower inflation.

Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart. A trade through 103.935 will signal a   resumption of the downtrend. A move through 107.150 will change the main trend to up.

The minor range is 107.150 to 103.935. Its pivot comes in at 105.543.

The nearest resistance is 107.780. The closest support is the June 16 main bottom at 102.950.

Daily Swing Chart Technical Forecast

Trader reaction to the minor pivot at 105.543 is likely to determine the direction of the December U.S. Dollar Index on Tuesday.

Bearish Scenario

A sustained move under 105.543 will indicate the presence of sellers. If this creates enough downside momentum then look for a retest of 103.935, followed by 102.950.

Bearish Scenario

A sustained move over 105.543 will signal the presence of buyers. If this generates enough upside momentum then look for a possible acceleration to the upside with 107.150 the next key target.