U.S. Dollar Index (DX) Futures Technical Analysis – Trader Reaction to Pivot at 96.960 Sets the Tone on Thursday

The U.S. Dollar is on the defensive against a basket of currencies for a third session on Thursday, following yesterday’s upbeat U.S. and European economic reports, though worries about the coronavirus blunted more aggressive risk taking ahead of upcoming U.S. jobs figures.

Against a basket of major currencies, the greenback is inching lower and tracking toward its worst week in a month, though the index could trade significantly in either direction depending on the U.S. Non-Farm Payrolls report due to be released at 12:30 GMT.

At 06:55 GMT, September U.S. Dollar Index futures are trading 97.030, down 0.125 or -0.13%.

Non-Farm Payrolls figures are expected to show an increase of 3 million jobs last month. But estimates vary widely and data comes as concerns grow about whether the U.S. economy can sustain its recovery as coronavirus infections surge and some states reimpose limits on business and personal activity, Reuters reported.

Due to the rapidly rising COVID-19 cases in the United States, the dollar’s response to the report could be skewed so it’s not cut and dry that a big jump in the number of jobs in June will send the dollar plunging, or a big miss to the downside will raise the greenback’s appeal as a safe-haven asset.

A strong number will indicate economic improvement, which should pressure the dollar. However, if investors are still worried about a second-wave of coronavirus cases then the selling could be muted.

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart, however, momentum is trending lower, following Tuesday’s closing price reversal top and subsequent confirmation of the potentially bearish chart pattern.

A trade through 97.810 will negate the closing price reversal top and signal a resumption of the uptrend. The main trend will change to down on a move through 96.320.

The minor trend is down. This confirms the shift in momentum.

The short-term range is 99.885 to 95.570. Its retracement zone at 97.730 to 98.240 is resistance. This zone stopped the rally on June 30 at 97.810.

The minor range is 95.570 to 97.810. Its 50% level or pivot at 96.690 is the next downside target.

Daily Swing Chart Technical Forecast

The early price action indicates a downside bias is developing. This makes the pivot at 96.690 the next downside target. Look for a technical bounce on the first test of this level.

Bearish Scenario

A trade through 96.690 will indicate the selling is getting stronger. Taking out 96.320 will change the main trend to down and possibly trigger an acceleration to the downside.

Bullish Scenario

Holding 96.690 will signal the return of buyers. If this is able to generate enough upside momentum then look for a retest of 97.730 to 97.810.

On the upside, the trigger point for an acceleration to the upside is the short-term Fibonacci level at 98.240.

For a look at all of today’s economic events, check out our economic calendar.