U.S. Dollar Index (DX) Futures Technical Analysis – Subdued Trade Ahead of US Advanced GDP Report

The U.S. Dollar is trading flat against a basket of major currencies on Thursday with traders hesitant to make any big bets ahead of today’s key economic reports on Fourth-Quarter US GDP, Durable Goods and Weekly Unemployment Claims.

The greenback is also being capped by hawkish comments from a number of European Central Bank (ECB) officials throughout the week and expectations for a softer tone from the Federal Reserve at next week’s policy meeting.

At 08:37 GMT, March U.S. Dollar index futures are trading 101.435, up 0.019 or +0.02%. On Wednesday, the Invesco DB US Dollar Index Bullish Fund ETF (UUP) settled at $27.37, down $0.08 or -0.29%.

Strong GDP Growth Expected in Fourth Quarter, Outlook Darkening

The U.S. economy likely maintained a strong pace of growth in the fourth quarter as consumers boosted spending on goods, but momentum appears to have slowed considerably towards the end of the year, with higher interest rates eroding demand, Reuters predicted.

The Commerce Department’s advance fourth-quarter gross domestic product report, due to be released at 13:30 GMT on Thursday, could mark the last quarter of solid growth before the lagged effects of the Federal Reserve’s fastest monetary policy tightening cycle since the 1980s kick in. Most economists expect a recession by the second half of the year, though mild compared to previous downturns, Reuters wrote.

According to a Reuters survey of economists, GDP growth likely increased at a 2.6% annualized rate last quarter after accelerating at a 3.2% pace in the third quarter. Estimates ranged from a 1.1% rate to a 3.7% pace.

A lower than expected reading is likely to be bearish for the U.S. Dollar, but a stronger-than-expected reading is not likely to change market expectations for a 25 basis point rate hike by the Fed next week.

Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart. A trade through the May 24 main bottom at 101.00 will reaffirm the downtrend. A move through 102.655 will change the main trend to up.

The minor range is 102.655 to 101.265. The index is currently trading on the weak side of its pivot at 101.960, making it resistance.

Daily Swing Chart Technical Forecast

Trader reaction to the minor pivot at 101.960 is likely to determine the direction of the March U.S. Dollar Index on Thursday.

Bearish Scenario

A sustained move under 101.960 will indicate the presence of sellers. If this creates enough downside momentum then look for the selling to possibly extend into 101.00. Taking out this level could start another steep break with the April 14, 2022 main bottom at 99.181 the next major target.

Bullish Scenario

Overtaking 101.960 and sustaining the move will signal the presence of buyers. If this creates enough upside momentum then look for a surge into 102.655. Taking out this level could launch a short-covering rally into the long-term resistance level at 103.664.