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James Hyerczyk
U.S. Dollar Index

The U.S. Dollar is trading higher against a basket of currencies early Monday. There are no major reports from the United States, Japan and the UK. Europe will release reports on the Current Account, Final CPI and Final Core CPI. The German Buba Monthly report is also expected to be released.

Last week, the dollar strengthened against all major currencies except the British Pound. The biggest influence on dollar index was a plunge in the Euro. It sold-off on expectations of an aggressive European Central Bank (ECB) at next month’s policy meeting. Traders are pricing in a rate cut and quantitative easing, which could include stock purchases.

Stronger-than-expected U.S. retail sales helped reduce fears of a U.S. recession. This helped Treasury yields recover from historic losses and the stock market to rebound from steep losses. Both moves reduced the need for safe-haven protection, pressuring the Japanese Yen.

At 04:29 GMT, September U.S. Dollar Index futures are trading 98.080, up 0.073 or +0.07%.

Daily September U.S. Dollar Index

Daily Technical Analysis

The main trend is up according to the daily swing chart. A trade through 98.700 will signal a resumption of the uptrend. The main trend will change to down on a move through 96.980. This is highly unlikely, but the eight day rally has put the Dollar Index in the window of time for a potentially bearish closing price reversal top.

The short-term range is 98.700 to 96.980. Its retracement zone at 98.045 to 97.840 is currently being tested. Trader reaction to this zone could determine the near-term direction of the index.

The intermediate range is 96.320 to 98.700. Its retracement zone at 97.510 to 97.230 is support.

The main range is 95.365 to 98.700. Its retracement zone at 97.030 to 96.640 is also support. It is controlling the longer-term direction of the index.


Daily Technical Forecast

Based on the early price action and the current price at 98.080, the direction of the September U.S. Dollar Index is likely to be determined by trader reaction to the short-term Fibonacci level at 98.045.

Bullish Scenario

A sustained move over 98.045 will indicate the presence of buyers. If this is able to generate enough upside momentum then look for a rally to possibly extend into the downtrending Gann angle at 98.325. This is followed by another downtrending Gann angle at 98.515. This is the last potential resistance angle before the 98.700 main top.

Bearish Scenario

A sustained move under 98.045 will signal the presence of sellers. However, don’t expect a sharp break. Instead, look for a labored move because of potential support at 97.84, 97.805, 97.695 and 97.545.

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