U.S. Dollar Index (DX) Futures Technical Analysis – Testing Retracement Zone Support at 93.745 – 93.560

The U.S. Dollar eased against a basket of major currencies on Monday, pulling back from the 1-year high hit on September 30, as traders looked to Friday’s U.S. Non-Farm Payrolls report for clues to the Federal Reserve’s next move.

With Chinese mainland markets closed until Thursday for the National Day holiday and South Korean markets also shut on Monday, the trading volume was extremely light with investor attention firmly focused on the upcoming jobs data.

At 17:18 GMT, December U.S. Dollar Index futures are trading 93.795, down 0.252 or -0.27%.

Friday’s data is expected to show continued improvement in the job market, with a forecast for 488,000 jobs to have been added in September, according to a Reuters poll – enough to keep the Federal Reserve on course to begin tapering before year’s end.

The Fed has signaled it will likely begin reducing its monthly bond purchases as soon as November but a big stumble in labor data could delay its plans, traders worry.

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 on September 30.

A trade through 94.520 will negate the closing price reversal top and signal a resumption of the uptrend. The main trend will change to down on a trade through 92.970.

The short-term range is 92.970 to 94.520. The index is currently testing its retracement zone at 93.745 to 93.560.

The main range is 91.935 to 94.520. Its retracement zone at 93.230 to 92.920 is the primary downside target.

Daily Swing Chart Technical Forecast

The direction of the December U.S. Dollar Index into the close on Monday is likely to be determined by trader reaction to 93.745.

Bullish Scenario

A sustained move over 93.745 will indicate the presence of buyers. If this creates enough late session momentum then look for a surge into a minor pivot at 94.100.

Overtaking 94.100 will indicate the buying is getting stronger. This could trigger a near-term surge into 94.520.

Bearish Scenario

A sustained move under 93.745 will signal the presence of sellers. The first downside target is 93.560. Buyers could come in on the first test of this level. If it fails, we could see an acceleration into the retracement zone at 93.230 to 92.920.

Side Notes

A closing price reversal top is not a change in trend, but it could trigger the start of a 2 to 3 day correction. Monday was the second day down from the reversal top and the index hit a 50% to 61.8% zone. So we could see a technical bounce back to 94.135 to 94.040.

If 93.560 fails then look for the selling to possibly extend into 93.230 to 92.920.