U.S. Dollar Index (DX) Futures Technical Analysis – Trader Reaction to 99.245 – 98.130 Sets Near-Term Tone

The U.S. Dollar is under pressure early Wednesday as investors cautiously returned to a basket of riskier currencies after President Trump edged toward rolling back some restrictions put in place to contain the coronavirus pandemic.

The greenback also remains under pressure following heavy measures by the Federal Reserve to boost dollar supply, however, analysts say it is too early for a full-scale retreat from safe-havens with the public health threat not yet eliminated.

At 05:40 GMT, June U.S. Dollar Index futures are trading 98.940, up 0.0055 or +0.06%.

The U.S. currency will face a major test later on Wednesday with the release of retail sales and industrial production, which is likely to provide more evidence of the economic costs of the lockdowns.

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart, however, momentum has shifted to the downside. The formation of a secondary lower top at 101.030 is also a bearish sign.

The main trend will change to down on a trade through the last main bottom at 98.345. A move through 101.030 will signal a resumption of the uptrend.

The main range is 94.530 to 103.960. Its retracement zone at 99.245 to 98.130 is currently being tested. It provided support on March 22 when the selling pressure stopped at 98.345. It think it’s safe to say that this zone is controlling the near-term direction of the dollar index.

On the upside, the long-term resistance is the 50% level at 101.495.

Short-Term Outlook

Based on the early price action and the current price at 98.940, the direction of the June U.S. Dollar Index the rest of the session on Wednesday is likely to be determined by trader reaction to the main 50% level at 99.245.

Bearish Outlook

A sustained move under 99.245 will indicate the presence of sellers. If this creates enough downside momentum then look for the weakness to possibly extend into the main bottom at 98.345 and the main Fibonacci level at 98.130.

Bullish Outlook

Overtaking and sustaining a rally over 99.245 will signal the return of buyers. This could trigger a rally into a minor pivot at 100.060, followed by the main top at 101.030.

Side Notes

Look for volatility to hit the market at 12:30 GMT with the release of the U.S. Retail and Core Retail Sales reports. The Empire State Manufacturing Index report will also be released at that time.

Later in the session, investors will get the opportunity to react to reports on Capacity Utilization, Industrial Production and the Fed Beige Book.