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James Hyerczyk
U.S. Dollar Index

The U.S. Dollar is trading higher against a basket of currencies on Wednesday as investors square positions ahead of today’s release of the minutes of the Fed’s July monetary policy meeting at 18:00 GMT. The dollar is posting gains against all components of the index including the Euro, British Pound, Japanese Yen, British Pound and Canadian Dollar.

At 07:33 GMT, September U.S. Dollar Index futures are trading 98.175, up 0.112 or +0.11%.

The U.S. Federal Reserve cut rates by 25 basis point after its meeting on July 30-31, citing global developments” and “muted inflation.” The Fed lowered rates as an insurance policy not against what’s wrong with the economy now, but what could go wrong in the future. It was the first rate cut by the central bank in more than a decade.

Traders will be looking for clues as to how aggressive Fed policymakers are willing to become in an effort to perk up the economy and prevent a global recession.

The reaction to the minutes could be muted, however, as investors prepare for the start of a global central bankers meeting, at which Federal Reserve Chairman Jerome Powell could give clues on further rate cuts early Friday.

Daily September U.S. Dollar Index

Daily Technical Analysis

The main trend is up according to the daily swing chart, however, yesterday’s closing price reversal top could be the first sign that momentum is getting ready to shift to the downside.

A trade through 98.335 will negate the closing price reversal top. This could lead to a test of the main top at 98.700. Taking out this level will reaffirm the uptrend.

A move through 97.990 will confirm the closing price reversal top. This could lead to the start of a 2 to 3 day counter-trend break.

The intermediate range is 98.700 to 96.980. Its retracement zone at 97.840 to 98.045 is support.

The short-term range is 96.980 to 98.335. Its 50% level at 97.660 is the next potential downside target.

The next retracement zone support is 97.510 to 97.230.


Daily Technical Forecast

Based on the early price action and the current price at 98.175, the direction of the September U.S. Dollar Index futures contract is likely to be determined by trader reaction to the Fibonacci level at 98.045.

Bullish Scenario

A sustained move over 98.045 will indicate the presence of buyers. This could trigger a rally into a downtrending Gann angle at 98.265. Sellers could come in on the first test of this angle. Overcoming it could lead to a test of the closing price reversal top at 98.335.

The next target angle over 98.335 drops in at 98.480. This is the last potential resistance angle before the 98.700 main top.

Bearish Scenario

Taking out 98.045 will signal the presence of sellers. A move through 97.990 will confirm the closing price reversal top. This could lead to a labored break with the first target angle 97.930. This is followed by a 50% level at 97.840 and another uptrending Gann angle at 97.820.

Sellers could come in hard under 97.820 with the next target a support cluster at 97.670 to 97.660.

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