U.S. Dollar Index (DX) Futures Technical Analysis – Trader Reaction to 93.245 Sets Near-Term Tone

The U.S. Dollar is edging lower against a basket of major currencies on Tuesday as political wrangling over a U.S. relief plan and the gloomy outlook for the economy due to the growing number of coronavirus cases weighed on the currency.

After its worst month in a decade in July, the greenback started August on a firm note as some investors trimmed their short positions. However that rally lost steam as investors looked to Washington for direction as talks on the next round of coronavirus relief aid continued.

At 17:46 GMT, September U.S. Dollar Index futures are trading 93.360, down 0.147 or -0.16%.

The White House and Democratic congressional leaders have reported some progress in recent days in discussions over a fifth major coronavirus aid bill to help the economy, but they remain apart on a range of issues.

Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart, but momentum has been trending higher since the formation of a closing price reversal bottom on Friday and the subsequent confirmation of the chart pattern on Monday.

A trade through 92.510 will negate the closing price reversal bottom and signal a resumption of the downtrend. The main trend is safe for now. It changes to up on a move through 97.810.

The minor trend is also down. A trade through 93.980 will change the minor trend to up. This will also confirm the shift in momentum to up.

The minor range is 92.510 to 93.980. Its 50% level at 93.245 is potential support. Aggressive counter-trend buyers are trying to form a secondary higher bottom at this price level today.

The second minor range is 96.380 to 92.510. Its retracement zone at 94.445 to 94.900 is the first upside target zone. Since the main trend is down, sellers are likely to come in on a test of this zone.

Short-Term Outlook

The next move is likely to be determined by trader reaction to 93.245. The market is either going to form a secondary higher bottom or this level will fail and the index will head into 92.510.