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James Hyerczyk
U.S. Dollar Index

The U.S. Dollar is trading slightly higher early Tuesday against a basket of major currencies. The index is basically mirroring the weaker trade in the Euro, its largest component. Against the rest of the basket, the greenback is trading mixed, losing ground to the Japanese Yen, Canadian Dollar and Swiss Franc, but firming against the weaker British Pound.

At 07:27 GMT, September U.S. Dollar Index futures are trading 98.250, up 0.029 or +0.03%.

Treasury yields are edging lower, but U.S. stocks are holding onto earlier gains. Nonetheless, the stronger Japanese Yen suggests we could be seeing a little safe-haven buying.

It wouldn’t come as a surprise today if dollar index investors did decide to start squaring up long positions after a 10 day rally, especially ahead of Wednesday’s Fed minutes and Friday’s key speech by Federal Reserve Chairman Jerome Powell at the central bankers’ symposium in Jackson Hole, Wyoming.

Daily September U.S. Dollar Index

Daily Technical Analysis

The main trend is up according to the daily swing chart. However, the index is up 10 sessions from its last main bottom on August 6 so we’re going to be watching for signs of a top. A 7-10 day rally tends to put a market inside the window of time for a closing price reversal top.

The short-term range is 98.700 to 96.980. Its retracement zone at 98.045 to 97.840 is support. The intermediate retracement zone at 97.510 to 97.230 is additional support.

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Daily Technical Forecast

Based on the early price action and the current price at 98.250, the direction of the September U.S. Dollar Index the rest of the session is likely to be determined by trader reaction to the downtrending Gann angle at 98.295 and yesterday’s close at 98.220.

Bullish Scenario

A sustained move over 98.295 will indicate the presence of buyers. This could trigger a breakout move into the next downtrending Gann angle at 98.500. This is the last potential resistance angle before the 98.700 main top.

Bearish Scenario

The inability to extend a rally over 98.295 will signal the presence of sellers or the lack of buyers. However, turning lower for the day on a move under 98.220 will put the market in a position to post a potentially bearish closing price reversal top. If confirmed, this could trigger the start of a 2 to 3 day correction.

The first downside target today is the short-term Fibonacci level at 98.043. This is followed by a support cluster at 97.865 to 97.840.

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