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James Hyerczyk
U.S. Dollar Index

The U.S. Dollar is trading higher against a basket of major currencies on Wednesday amid easing tensions over a currency war between the United States and China. The dollar is posting gains against the Euro, British Pound, Canadian Dollar and Swiss Franc. However, gains are being limited by another dip in U.S. Treasury yields and a stronger Japanese Yen.

The Japanese Yen is picking up strength because of safe-haven buying related to a surprisingly aggressive 50-basis point rate cut by the Reserve Bank of New Zealand. According to CNBC, “Analysts said such large moves into two of the traditionally higher-yielding major currencies had jolted forex markets, and encouraged a move into the perceived safety of the yen.”

At 10:15 GMT, September U.S. Dollar Index futures are trading 97.515, up 0.075 or +0.08%.

Daily September U.S. Dollar Index

Daily Technical Analysis

The main trend is up according to the daily swing chart, however, momentum has been trending lower since the formation of the closing price reversal top at 98.700 on August 1.

A trade through 96.980 will signal a resumption of the downtrend. A move through 96.320 will change the main trend to down.

A trade through 98.700 will signal a resumption of the uptrend. This is highly unlikely today but there is room for a rally into a short-term retracement zone.

The main range is 95.365 to 98.700. Its retracement zone at 97.030 to 96.640 is support. This zone stopped the selling at 96.980 on August 6.

The intermediate range is 96.320 to 98.700. Its retracement zone at 97.510 to 97.230 is currently being tested.

The short-term range is 98.700 to 96.980. Its retracement zone at 97.840 to 98.045 is the next potential upside target.


Daily Technical Forecast

Based on the early price action, the direction of the September U.S. Dollar Index on Wednesday is likely to be determined by trader reaction to the 50% level at 97.510.

Bullish Scenario

A sustained move over 97.510 will indicate the presence of buyers. This could trigger a rally into a steep downtrending Gann angle at 97.70. Taking out this angle could trigger a surge into the short-term retracement zone at 97.84 to 98.045. Sellers could show up on a test of this area. They will be trying to form a secondary lower top.

Bearish Scenario

A sustained move under 97.510 will signal the presence of sellers. This could trigger a break into an uptrending Gann angle at 97.305, a Fibonacci level at 97.230 and an uptrending Gann angle at 97.195.

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