U.S. Dollar Index (DX) Futures Technical Analysis – Weakens Amid Recession Concerns

The U.S. Dollar finished lower against a basket of major currencies on Wednesday amid concerns that rising interest rates could drive the U.S. economy into recession in 2023.

For over a month, some investors have been wagering the Fed will soon slow its rate tightening pace, but recent upbeat U.S. labor market, services and factory data has added to investor uncertainty over the Fed’s policy outlook. The market is also indicting it expects the Fed to raise rates by 50 basis points next week.

On Wednesday, December U.S. Dollar Index futures settled at 105.056, down 0.4860 or -0.46%. The Invesco DB US Dollar Index Bullish Fund ETF (UUP) closed at $28.40, down $0.08 or -0.28%.

The weakness may have been the result of commentary from several U.S. bank executives from earlier in the week. One of them was Bank of America CEO Brian Moynihan, who told investors at a Goldman Sachs financial conference that the bank’s research shows “negative growth” in the first part of 2023, but the contraction will be “mild.”

Dollar traders will be watching next week’s Fed interest rate and policy announcements very closely. Especially important will be any comments on recession. The dollar could plunge if the Fed becomes concerned enough about a recession to announce it had discussed a pause in rate hikes.

Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart. A trade through 103.935 will signal a resumption of the downtrend. A move through 107.150 will change the main trend to up.

The short-term range is 107.150 to 103.935. Its pivot at 105.800 is resistance. The minor range is 103.935 to 105.800. Its pivot at 104.868 is support.

On the upside, the major resistance is a long-term Fibonacci level at 107.780. On the downside, the major support is the June 16 main bottom at 102.950.

Daily Swing Chart Technical Forecast

Trader reaction to the pivots at 104.868 and 105.543 is likely to determine the direction of the December U.S. Dollar Index on Thursday.

Bearish Scenario

A sustained move under 104.868 will indicate the presence of sellers. This could trigger a break into the main bottom at 103.935, followed by 102.950.

Bullish Scenario

A sustained move over 105.543 will signal the presence of buyers. Taking out 105.800 could trigger an acceleration into the main top at 107.150.