U.S. Dollar Index (DX) Futures Technical Analysis – Trader Reaction to Pivot at 99.925 Sets the Tone

Flight to safety buying pushed the U.S. Dollar higher against a basket of currencies on Wednesday after dire retail and factory data revealed the severity of the collapse in U.S. economic activity caused by the novel coronavirus outbreak.

U.S. government data showed on Wednesday that retail sales fell 8.7% in March, the biggest decline since tracking began in 1992, underlined fears that damage to the economy from the virus outbreak will be deep and protracted. Consumer spending accounts for more than two-thirds of U.S. economic activity.

On Wednesday, June U.S. Dollar Index futures settled at 99.486, up 0.601 or +0.61%.

Separately, a report from the Federal Reserve showed manufacturing output plummeted 6.3% last month, the biggest decrease since February 1946.

The New York Federal Reserve also reported that its Empire State manufacturing index, which tracks activity in the sector for New York State, fell to an all-time low.

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart, however, momentum is trending lower. A trade through the two main bottoms at 98.815 and 98.345 will change the main trend to down. Taking out the last swing top at 101.030 will signal a resumption of the uptrend.

The minor range is 101.030 to 98.815. Its 50% level or pivot at 99.925 is likely to control the direction of the index on Thursday.

The short-term range is 94.530 to 103.960. Its retracement zone at 99.245 to 98.130 is support. This zone stopped the selling at 98.345 on March 27 and at 98.815 on April 14. This zone is controlling the near-term direction of the index.

The major resistance is the long-term 50% level at 101.495.

Daily Swing Chart Technical Forecast

Based on Wednesday’s price action and close at 99.486, the direction of the June U.S. Dollar Index on Wednesday is likely to be determined by trader reaction to the pivot at 99.925.

Bullish Scenario

A sustained move over 99.925 will indicate the presence of buyers. If this move creates enough upside momentum then look for the rally to possibly extend into the main top at 101.030, followed by the major 50% level at 101.495.

Bearish Scenario

A sustained move under 99.925 will signal the presence of sellers. This could lead to a quick test of the short-term 50% level at 99.245, followed by the main bottom at 98.815.

Taking out 98.815 should lead to a test of the next main bottom at 98.345 and the short-term Fibonacci level at 98.130. The latter is a potential trigger point for an acceleration to the downside with the next major target the March 9 main bottom at 94.530.