U.S. Dollar Index (DX) Futures Technical Analysis – Trading on Strong Side of 91.850 – 92.500 Retracement Zone

The U.S. Dollar hit its highest level against a basket of currencies since April 6 on Thursday, as traders prepared for Friday’s U.S. jobs report that could offer clues on when the Federal Reserve will start to pare back stimulus.

According to Reuters, the index posted its best month since November 2016 in June, driven by the Federal Open Market Committee (FOMC)’s surprise hawkish shift in the middle of that month, when policymakers signaled two interest rate hikes by the end of 2023.

At 19:20 GMT, September U.S. Dollar Index futures are trading 92.575, up 0.144 or +0.16%.

Traders are looking to Friday’s U.S. Non-Farm Payrolls report for confirmation of that outlook, with economists polled by Reuters expecting a gain of 700,000 jobs last month, compared with 559,000 in May, and an unemployment rate of 5.7% versus 5.8% in the previous month.

In other news, the greenback extended gains on Wednesday after data showed U.S. private payrolls increased by a greater-than-expected 692,000 jobs in June.

Also helping to support the dollar was a slight rise in U.S. Treasury yields. Yields rose as weekly jobless claims data came in lower than expected, a promising sign ahead of the big June jobs report Friday. The U.S. Labor Department reported weekly jobless claims totaled 364,000 for the week ended June 26, a pandemic low. Economists polled by Dow Jones were expecting 390,000 claims, after totaling 411,000 the week prior.

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart. The uptrend was reaffirmed this week when buyers took out the last main top at 92.395. A trade through 91.505 will change the main trend to down.

The main range is 94.572 to 89.130. The index is currently trading on the strong side of its retracement zone at 91.850 to 92.495.

The short-term range is 93.430 to 89.545. Its retracement zone at 91.490 to 91.950 is potential support.

The support cluster at 91.950 to 91.850 is the best support area.

Daily Swing Chart Technical Forecast

The direction of the September U.S. Dollar Index into the close on Thursday will be determined by trader reaction to the main Fibonacci level at 92.495.

Bullish Scenario

A sustained move over 92.495 will indicate the presence of buyers. If this move is able to generate enough upside momentum then look for the buying to eventually extend into the March 31, 2021 main top at 93.430.

Bearish Scenario

A sustained move under 92.495 will signal the presence of sellers. If this move creates enough downside momentum then look for a move into 91.950 to 91.850. Since the main trend is up, look for buyers on the first test of this area. If 91.85 fails as support then look for a sharp break into another support cluster at 91.505 to 91.490.