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James Hyerczyk
U.S. Dollar

Yields are lower in the United States early Monday, helping to weigh on demand for the U.S. Dollar against a basket of currencies. The greenback was supported early last week after Fed Chair Jerome Powell failed to signal future rate cuts. However, it began to retreat from a two-year high after President Trump announced new tariffs against China, raising concerns over a worsening global economic slowdown.

At 07:39 GMT, September U.S. Dollar Index futures are trading 97.800, down 0.850 or -0.09%.

The dollar was further pressured after U.S. employment data showed the labor market was slowing. Non-farm payrolls came in at 164,000, meeting expectations, but that figure was lower than the prior month. Additionally, wages only increased modestly.

The price action on Friday and the carryover selling early today indicates that traders have already locked in a Federal Reserve rate cut in September. Dollar Index prices will now be sensitive to whether the market thinks the central bank will cut 25-basis points or 50-basis points.

Daily September U.S. Dollar Index

Daily Technical Analysis

The main trend is up according to the daily swing chart, however, momentum has shifted to the downside.

The shift in momentum occurred with the formation of the closing price reversal top at 98.700 on August 1. A trade through 98.700 will negate the closing price reversal top and signal a resumption of the uptrend. The main trend will change to down when sellers take out 96.320.

The minor trend is down. It changed to down when sellers took out the minor bottom at 97.755. This was the last minor bottom before last week’s two-year high. The change in trend also confirmed the change in momentum.

The short-term range is 96.320 to 98.700. Its retracement zone at 97.510 to 97.230 is the first downside target zone. We could see a technical bounce on the first test of this area.

The main range is 95.365 to 98.700. Its retracement zone at 97.030 to 96.640 is another potential downside target. This zone is controlling the lower-term direction of the index.


Daily Technical Forecast

Based on the early price action and the current price at 97.800, the direction of the September U.S. Dollar index on Monday is likely to be determined by trader reaction to the uptrending Gann angle at 97.820.

Bearish Scenario

A sustained move under 97.820 will indicate the presence of sellers. If this creates enough downside momentum then look for the selling to possibly extend into the 50% level at 97.510. Watch for buyers on this move. If it fails then look for the selling to possibly extend into the Fibonacci level at 97.230, followed by an uptrending Gann angle at 97.175.

Bullish Scenario

A sustained move over 97.820 will signal the presence of buyers. If this generates enough upside momentum then look for the buying to possibly extend into the downtrending Gann angle at 98.200. Overtaking this angle could lead to a test of the angle at 98.450.

Although the index is starting to weaken, I think we’re going to have to see the formation of a secondary lower top in order to attract more short-sellers. This current break is likely being fueled by profit-taking and long-liquidation.

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