U.S. Dollar Index (DX) Futures Technical Analysis – Wave of Late Session Profit-Taking Could Form Reversal Top

The U.S. Dollar hit its highest level against a basket of major currencies in more than a year early Friday before settling into a range and threatening to turn lower for the session.

The bullish catalyst was data that showed more jobs were created in the United States than expected in October, providing the U.S. Federal Reserve further proof that the economic recovery is back on track. The bearish catalyst was a spike to the upside that suggested the market has risen too far, too fast, encouraging investors to trim long positions and book some profit.

At 19:22 GMT, December U.S. Dollar Index futures are trading 94.315, down 0.026 or -0.03%.

In economic news, Non-Farm Payrolls increased by 531,000 jobs last month, above the 450,000 jobs forecast, as the surge in COVID-19 infections over the summer subsided.

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart. A trade through the intraday high at 94.645 will signal a resumption of the uptrend. A move through 93.800 will change the main trend to down.

The minor range is 93.800 to 94.645. Its retracement zone at 94.225 to 94.125 is providing intraday support, having stopped the selling pressure at 94.180 shortly after the mid-session.

Additional support is the short-term retracement zone at 93.810 to 93.610.

Daily Swing Chart Technical Forecast

The direction of the December U.S. Dollar Index into the close on Friday is likely to be determined by trader reaction to 94.340.

Bullish Scenario

A sustained move over 94.340 will indicate the presence of buyers. If this move can generate enough upside momentum then look for the rally to possibly extend into 94.645, followed closely by the September 25, 2020 main top at 94.740.

Bearish Scenario

A sustained move under 94.340 will signal the presence of sellers. If this creates enough downside momentum then look for the selling to continue into 94.225 to 94.125.

Since the main trend is up, we could see a technical bounce on the test of 94.225 to 94.125. But if the latter is taken out with strong selling pressure then look for the selling to possibly extend into the support cluster 93.800 over the short-run.

Side Notes

A close under 94.340 will form a potentially bearish closing price reversal top. If confirmed on Monday, this could trigger the start of a 2 to 3 day correction.