U.S. Dollar Index (DX) Futures Technical Analysis – Weak Close Could Lead to Short-Term Change in Minor Trend

The U.S. Dollar fell to nearly a one-week low on Thursday as investors flocked to riskier currencies such as the Australian, New Zealand and Canadian Dollars as fears over the fallout from Omicron dulled.

Risk appetite has improved since last Monday, when financial markets were rattled by government restrictions relating to the spread of Omicron.

On Thursday, March U.S. Dollar Index futures settled at 95.985, down 0.074 or -0.08%. The Invesco DB US Dollar Index Bullish Fund ETF finished at $25.73, down $0.01 or -0.06%.

With worries over the severity of the Omicron variant fading, investors are shedding the traditional safe havens like the U.S. Dollar, U. S. Treasurys and Japanese Yen. Upbeat news on the vaccines and Omicron-related hospitalizations also helped boost investors’ appetite for risk, lifting stocks and pushing U.S. Treasury yields higher.

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart, however, momentum has been trending lower since the formation of the closing price reversal top on December 15.

A trade through 96.895 will negate the chart pattern and signal a resumption of the uptrend. A move through 95.500 will change the main trend to down.

The minor trend is also up. A trade through 95.810 will change the minor trend to down. This will confirm the shift in momentum.

The short-term range is 95.500 to 96.895. The index finished on the weak side of its 50% level at 96.200, making it resistance.

The minor range is 96.895 to 95.810. Its 50% level at 96.355 is additional resistance.

The intermediate range is 93.810 to 96.895. If the main trend changes to down then its 50% level at 95.360 will become the first downside target.

The main range is 93.200 to 96.895. Its retracement zone at 95.050 to 94.610 is the major support. It’s controlling the near-term direction of the index.

Short-term Outlook

Closing on the weak side of a pair of pivots at 96.200 and 96.355 has put the March U.S. Dollar Index in a weak position ahead of the long holiday weekend, setting up the potential for a lower opening on Monday.

The market is being driven by two stories, which could be the reason for last week’s choppy trade. On the bullish side, the index is being underpinned by the prospect for higher Treasury yields now that the Fed has opened the door to possibly three rate hikes in 2022. On the bearish side, there may be more safe-haven liquidation in store if investors continue to price in an easing of Omicron concerns.

Look for the downside pressure to continue on a sustained move under 96.200. Be prepared for a change in the minor trend if 95.810 fails as support with 95.500 – 95.360 the next likely target area.

On the upside, overcoming 96.355 will be an early sign that buyers have returned. If there is a follow-through move to the upside then this could create enough momentum to fuel a really into the main top at 96.895.