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U.S. Dollar Index (DX) Futures Technical Analysis – Trader Reaction to 99.200 Sets the Tone on Monday

Based on Friday’s price action and the close at 98.188, the direction of the March U.S. Dollar Index on Monday is likely to be determined by trader reaction to the minor pivot at 99.200.
James Hyerczyk

The U.S. Dollar posted a dramatic reversal to the downside on Friday after bullish investors cashed in long positions in reaction to weaker-than-expected U.S. economic data that suggested the economy may not be as strong as expected.

Helping to drive the dollar lower was a survey of purchasing managers that showed U.S. business activity in both the manufacturing and services sectors stalled in February on coronavirus worries.

On Friday, March U.S. Dollar Index futures settled at 98.188, down 0.588 or -0.59%.

The dollar was also pressured by a plunge in U.S. Treasury yields, which fell as mounting concerns about the economic impact of the coronavirus epidemic drove investors into safe-haven assets. The benchmark 10-year yield was down 5.4 basis points in afternoon trade at 1.4713%. It was the first time the note yielded less than 1.5% since early September.

The 30-year bond was down 5.4 basis points at 1.9181%. The session low was 1.886%, an all-time low.

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart. A trade through 99.815 will signal a resumption of the uptrend. The main trend will change to down on a move through 97.165. This is highly unlikely, but there is room for a normal 50% to 61.8% correction.

The minor trend is also up. A trade through 98.580 will change the minor trend to down. This will shift momentum to the downside.

The minor range is 98.58 to 99.815. Its 50% level or pivot at 99.200 was tested on Friday with the market closing slightly below this level.

The short-term range is 97.165 to 99.815. Its retracement zone at 98.490 to 98.180 is the first downside target.

The intermediate range is 96.815 to 99.815. Its retracement zone is 98.315 to 97.960.

The major range is 96.020 to 99.815. Its retracement zone at 97.920 to 97.470 is the major downside target and value zone.

A pair of retracement levels come in at 97.960 to 97.920, creating an important support cluster.

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Daily Swing Chart Technical Forecast

Based on Friday’s price action and the close at 98.188, the direction of the March U.S. Dollar Index on Monday is likely to be determined by trader reaction to the minor pivot at 99.200.

Bullish Scenario

A sustained move over 99.200 will indicate the presence of buyers. The first upside target is a minor pivot at 99.480. Overtaking this level could lead to a test of the minor top at 99.815. This is a potential trigger point for an acceleration to the upside.

Bearish Scenario

A sustained move under 99.200 will signal the presence of sellers. This could trigger an acceleration to the downside with the first potential target the minor bottom at 98.580, followed by a 50% level at 98.490.

Side Notes

We should find out on Monday if Friday’s sell-off was a “one and done” move in reaction to the weak U.S. economic data or the start of a major shift in momentum to the downside.

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