U.S. Dollar Index (DX) Futures Technical Analysis – US 10-Year Treasury Note Yields Controlling Price Action

The U.S. Dollar is inching lower against a basket of major currencies early Wednesday after posting its biggest daily gain in weeks the previous session. The price action is being controlled primarily by the movement in U.S. 10-year Treasury yields.

On Tuesday, yields rose, making the U.S. Dollar a more attractive asset. Early Wednesday, yields are dipping lower, dragging the dollar with them. Most of the weakness in the index is being fueled by gains in the heavily-weighted Euro and the safe-haven Japanese Yen.

At 04:37 GMT, March U.S. Dollar Index futures are trading 96.125, down 0.264 or -0.27%.

Daily Technical Analysis

The main trend is down according to the daily swing chart. A trade through 94.610 will signal a resumption of the downtrend. This will also make 96.580 a new main top. Currently, the main trend will change to up on a trade through the February 20 main top at 99.815.

The minor trend is also down. The new minor bottom is 94.61.

The minor range is 94.610 to 96.580. Its 50% level or pivot at 95.595 is the first downside target today.

The short-term range is 99.815 to 94.61. Its retracement zone at 97.215 to 97.830 is the primary upside target. Since the main trend is down, sellers could come in on a test of this area.

Daily Technical Forecast

Based on the early price action and the current price at 96.125, the direction of the March U.S. Dollar Index the rest of the session on Wednesday is likely to be determined by trader reaction to the steep downtrending Gann angle at 96.315.

Bearish Scenario

A sustained move under 96.315 will indicate the presence of sellers. If this move creates enough downside momentum then look for the selling to possibly extend into the minor pivot at 95.595.

Crossing to the weak side of the pivot at 95.595 will indicate the selling is getting stronger. This could trigger an acceleration to the downside with the next target the minor bottom at 94.610.

Bullish Scenario

A sustained move over 96.315 will signal the presence of buyers. The next target is this week’s high at 96.580.

Overcoming 96.580 will indicate the buying is getting stronger. This could trigger a surge into the short-term 50% level at 97.215. Watch for sellers on the first test of this level.

Overtaking 97.215 will be another sign of strength with potential upside targets coming in at 97.830 and 98.065.

Side Notes

The U.S. Dollar Index is expected to move lock-step with the 10-year Treasury Note futures contract. Instead of watching all the currencies in the basket, pay attention to the futures contract.

If the June 10-year Treasury Note futures contract rises (yields down) then look for the March U.S. Dollar Index to weaken.

If the June 10-year Treasury Note futures contract declines (yields up) then look for the March U.S. Dollar Index to strengthen.