U.S. Dollar Index Futures (DX) Technical Analysis – Closing Price Reversal Top Confirmed, 96.850 Next Downside Target

The U.S. Dollar is trading lower against a basket of currencies early Friday as optimism around easing trade tensions between the United States and China continued to reduce the greenback’s appeal as a safe-haven assets, even as the holiday-thinned trading limited large moves in the FX market.

If you recall, throughout the trade war between the two economic powerhouses, investors were parking money into the U.S. Dollar for protection. Now that those tensions have eased, investors are dumping the U.S. Dollar for higher-yielding and higher-risk currencies. This is putting pressure on the dollar index. The exception is the Japanese Yen, which is trading weaker against the dollar because of the widening interest rate differential.

At 05:10 GMT, March U.S. Dollar Index futures are trading 97.030, down 0.085 or -0.09%.

Early Friday, the Euro, British Pound, Canadian Dollar, Swiss Franc and Japanese Yen – the majority of the currencies that make up the index – are trading higher against the U.S. Dollar.

Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart. The market is feeling the pressure of Monday’s closing price reversal top. A trade through 96.295 will reaffirm the downtrend. A secondary lower top at 97.405 has also formed.

A trade through 97.405 will negate the closing price reversal top and signal a resumption of the uptrend.

The short-term range is 98.045 to 96.295. Its retracement zone at 97.170 to 97.380 is resistance. It stopped the selling earlier in the week.

The minor range is 96.295 to 97.405. Its 50% level at 96.850 is the next downside target.

The main range is 94.665 to 98.735. Its retracement zone at 96.700 to 96.220 is major support. This zone is controlling the longer-term direction of the U.S. Dollar Index.

Daily Swing Chart Technical Forecast

Based on the early price action and yesterday’s confirmation of the closing price reversal top, the direction of the March U.S. Dollar Index the rest of the session on Friday is likely to be determined by trader reaction to the 50% level at 97.170.

Bearish Scenario

A sustained move under 97.170 will indicate the presence of sellers. If this continues to generate enough downside momentum then look for the selling to possibly extend into the minor pivot at 96.850. This is followed by the major 50% level at 96.700.

Bullish Scenario

Overcoming 97.170 will signal the presence of buyers. If this move generates enough upside momentum then look for a possible surge into the short-term Fibonacci level at 97.380, followed by the main top at 97.405.

Taking out 96.405 will change the main trend to up. This could trigger an acceleration to the upside.