U.S. Dollar Index (DX) Futures Technical Analysis – Testing Major Retracement Zone at 99.245 to 98.130

The U.S. Dollar fell against a basket of currencies on Thursday in choppy trading as investors rebalanced portfolios for month-end and after U.S. stock markets pared losses, but remained lower on the day.

Month-end rebalancing is seen as negative for the greenback with investors expected to sell the dollar against other major currencies, according to Reuters.

The dollar had briefly gained earlier on Thursday as stocks slipped and after the European Central Bank disappointed some investors who had expected that it would expand bond purchases to junk bonds, Reuters said.

Improving risk appetite, if it continues, is likely to dent the dollar even further. Investors are getting more optimistic that economies globally may be closer to reopening as the number of cases of the novel coronavirus decline, Reuters added.

On Thursday, June U.S. Dollar Index futures settled at 99.035, down 0.609 or -0.61%.

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart, however, momentum has been trending lower since the formation of the closing price reversal top at 100.975 on April 24.

The main trend will change to down on a trade through 98.815. This should lead to a quick test of the next main bottom at 98.345.  A trade through 100.975 will negate the closing price reversal top and signal a resumption of the uptrend.

The main range is 94.530 to 103.960. The market is currently testing its retracement zone at 99.245 to 98.130. This zone stopped the selling at 98.345 on March 27 and 98.815 on April 14. It is controlling the near-term direction of the index.

The minor range is 98.345 to 101.030. Its 50% level or pivot at 99.690 in new resistance.

Daily Swing Chart Technical Forecast

Based on Thursday’s price action and the close at 99.035, the direction of the June U.S. Dollar Index on Friday is likely to be determined by trader reaction to the main 50% level at 99.245.

Bearish Scenario

A sustained move under 99.245 will indicate the presence of sellers. Taking out the main bottom at 98.815 will change the main trend to down. This could trigger a quick break into the next main bottom at 98.345 and the main Fibonacci level at 98.130.

The Fib level at 98.130 is a potential trigger point for an acceleration to the downside.

Bullish Scenario

Overtaking 99.245 and sustaining the move will indicate the presence of buyers. The first target is the minor pivot at 98.690. This is a potential trigger point for a surge to the upside.