U.S. Dollar Index (DX) Futures Technical Analysis – Trader Reaction to 92.850 Sets the Early Tone on Friday

The U.S. Dollar Index is trading higher late Thursday after posting a volatile two-sided trade throughout the session. The index fell sharply early in the session on follow-through selling related to lower demand for safe-haven projection and a mixed reaction to the European Central Bank’s monetary policy decisions.

At 20:42 GMT, September U.S. Dollar Index futures are trading 92.880, up 0.121 or +0.13%. This is up from 92.505.

The dollar was under pressure early Thursday after the European Central Bank (ECB) met expectations by pledging to keep interest rates at record lows for even longer, and following weaker-than-expected U.S. jobless claims data.

ECB President Christine Lagarde didn’t really say anything to change the market’s cautious outlook on the Euro Zone. She said a fresh wave of the coronavirus could pose a risk to the region’s economic recovery.

In other news, data showed initial claims for state unemployment benefits increased 51,000 to a seasonally-adjusted 419,000 for the week ended July 17, the highest level since mid-May. Economists polled by Reuters had forecast 350,000 applications for the latest week.

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart, however, momentum shifted to the downside when Wednesday’s closing price reversal top was confirmed.

A trade through 93.195 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 92.075.

The minor trend is also up. A trade through 92.275 will change the minor trend to down. This will confirm the shift in momentum.

The minor range is 93.195 to 92.505. Its 50% level or pivot comes in at 92.850.

On the downside, support comes in pairs at 92.495 and 92.350, and 91.945 and 91.850.

Daily Swing Chart Technical Forecast

The direction of the September U.S. Dollar Index early Friday is likely to be determined by trader reaction to 92.850.

Bullish Scenario

A sustained move over 92.850 will indicate the presence of buyers. If this creates enough upside momentum then look for a surge into 93.195. Taking out this level will reaffirm the uptrend with the March 31 main top at 93.430 the next likely upside target.

Bearish Scenario

A sustained move under 92.850 will signal the presence of sellers. This could trigger an acceleration to the downside with 92.495 – 92.350 the next likely downside target.

If 92.350 fails to hold then look for the selling to possibly extend into 92.075, followed by 91.950 – 91.850.