U.S. Dollar Index (DX) Futures Technical Analysis – Sustained Rally Over 96.500 Makes 97.120 New Target

The U.S. Dollar hit its highest level against a basket of major currencies in over a year on Wednesday as a hawkish tilt by Federal Reserve policymakers, buoyed by solid U.S. economic data, contrasted with more dovish monetary outlooks in Europe and Japan. Although the index retreated slightly late in the session, it remained within striking distance of its best level since July 2020.

On Wednesday, December U.S. Dollar Index futures settled at 96.872, up 0.378 or +0.39%.

The U.S. Federal Reserve meeting minutes, released at 19:00 GMT on Wednesday, reinforced market expectations that the Fed will raise rates sooner than other major central banks. The news helped drive up U.S. Treasury yields, making the U.S. Dollar a more attractive asset.

Minutes from the November 2-3 meeting indicated the Fed had become more concerned about rising inflation as various policymakers said they would be open to speeding up the taper of their bond-buying program if high inflation held and move more quickly to raise interest rates.

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart. A trade through 96.940 will signal a resumption of the uptrend. A move through 93.865 will change the main trend to down. This is highly unlikely, but due to the prolonged move up in terms of price and time, the index will open Friday’s session inside the window of time for a closing price reversal top.

The minor trend is also up. A trade through 95.525 will change the minor trend to down. This will shift momentum to the downside.

The long-term support is the 50% level at 96.500.

This is followed by three minor 50% levels at 96.235, 95.955 and 95.405. These levels will move up as the market moves higher.

The short-term support is 95.105 to 94.670. This zone is a value area. It will also move up along with the rally.

On the upside, the nearest resistance is a main top at 97.120, followed by a long-term Fibonacci level at 98.230.

Daily Swing Chart Technical Forecast

The direction of the December U.S. Dollar Index on Friday is likely to be determined by trader reaction to 96.872.

Bullish Scenario

A sustained move over 96.872 will indicate the presence of buyers. Taking out 96.940 will indicate the buying is getting stronger. This is also a potential trigger point for an acceleration to the upside with 97.120 the next likely upside target.

Bearish Scenario

A sustained move under 96.872 will signal the presence of sellers. This could trigger a break into 96.500.

Look for buyers on the first test of 96.500, if it fails then look for the selling to possibly extend into a pair of 50% levels at 96.235 and 95.955.

Side Notes

Taking out 96.940 then closing below 96.872 will form a potentially bearish closing price reversal top. The chart pattern won’t change the main trend to down, but if confirmed, it could trigger the start of a 2 to 3 day correction.