U.S. Dollar Index (DX) Futures Technical Analysis – Traders Digesting Impact of PPI Data on Fed Policy

James Hyerczyk
Updated: Jan 19, 2023, 00:31 UTC

U.S. Treasury yields fell on Wednesday as December’s producer price index hinted that inflation may have reached its peak.

US Dollar Index

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The U.S. Dollar is inching higher against a basket of major currencies on Wednesday in a volatile trading session that featured dramatic moves in both directions. The index was initially stronger after a key Bank of Japan policy decision weakened the Yen. Later, the index was pressured by weaker-than-expected U.S. economic data. Essentially, it was a steep drop in U.S. Treasury yields that kept a lid on prices.

At 20:02 GMT, March U.S. Dollar Index futures are trading 102.145, up 0.004 or 0.00%. The Invesco DB US Dollar Index Bullish Fund ETF (UUP) is at $27.56, up $0.01 or +0.02%.

10-Year Treasury Yield Tumbles after Producer Prices Decline More-than-Expected

U.S. Treasury yields fell on Wednesday as December’s producer price index hinted that inflation may have reached its peak.

The yield on the benchmark 10-year Treasury note dropped 14 basis points to 3.388%, its lowest level since September. The yield on the 30-year Treasury bond shed 9 basis points to 3.553%.

The move in bond yields came as December’s producer price index, which measures final demand prices across hundreds of categories, showed a larger-than-expected decline and signaled that inflation may be beginning to ease. Wholesale prices fell 0.5% for the month, while economists surveyed by Dow Jones had expected a 0.1% decline.

Daily March U.S. Dollar Index

Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart. A trade through 102.655 will change the main trend to up. A move through 101.265 will signal a resumption of the downtrend.

The minor range is 102.655 – 101.265. The index is currently trading on the strong side of its pivot at 101.960, making it support.

The major support is the May 24, 2022 main bottom at 101.000. The major resistance is the long-term Fibonacci level at 103.664.

Daily Swing Chart Technical Forecast

Trader reaction to the minor pivot at 101.960 is likely to determine the direction of the March U.S. Dollar Index into the close on Wednesday.

Bullish Scenario

A sustained move over 101.960 will indicate the presence of buyers. If this generates enough upside momentum then look for a test of the intraday high at 102.655.

Bearish Scenario

A sustained move under 101.960 will signal the presence of sellers. If this move creates enough downside momentum then look for a retest of the intraday low at 101.265, followed by the 8-month low at 101.265.

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

About the Author

James is a Florida-based technical analyst, market researcher, educator and trader with 35+ years of experience. He is an expert in the area of patterns, price and time analysis as it applies to futures, Forex, and stocks.

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