U.S. Dollar Index Futures (DX) Technical Analysis – Counter-Trend Buyers Respecting 97.14 – 96.630 Retracement Zone

The U.S. Dollar is trading slightly higher against a basket currencies after a Brexit event over the week-end generated pressure on the British Pound and Euro. The greenback is also posting a gain against the Canadian Dollar as Loonie investors face an upcoming election. Upbeat comments from the U.S. on Friday and China on Saturday may be pressuring demand for the safe-haven Swiss Franc and Japanese Yen.

At 05:22 GMT, December U.S. Dollar Index futures are trading 97.075, up 0.067 or +0.07%.

Over the weekend, the British parliament delayed a crucial vote on a Brexit withdrawal agreement. Lawmakers on Saturday voted to withhold a decision on Johnson’s deal, a move that forced him to seek from the EU a third postponement of Britain’s departure from the bloc. Britain’s exit had been envisaged for October 31.

Analysts said market focus will turn to this week’s vote on Johnson’s deal. Look for heightened volatility at that time.

There are no major U.S. economic reports on Monday so most of the focus will be on Brexit and trade deal headlines. At the end of last week, the CME FedWatch Tool shows a 93.5% chance of a Fed rate cut on October 31.

Daily Technical Analysis

The main trend is down according to the daily swing chart. The trend turned down last week when sellers took out a bottom at 97.560. It was reaffirmed later in the week when sellers broke through another main bottom at 96.960.

The main trend will change to up on a trade through 99.305. This is highly unlikely. However, the index is down 14 sessions from its last main top, which puts it inside the window of time for a potentially bullish closing price reversal bottom.

The main range is the June 25 bottom at 94.975 to the October 1 top at 99.305. Its retracement zone at 97.140 to 96.630 is the primary downside target. This zone is currently being tested. Aggressive counter-trend buyers, looking for value could step in on a test of this zone. So don’t be surprised if a support base forms this week inside this area.

Daily Technical Forecast

Based on the early price action and the current price at 97.075, the direction of the December U.S. Dollar Index the rest of the session on Monday is likely to be determined by trader reaction to the main 50% level at 97.140.

Bearish Scenario

A sustained move under 97.140 will indicate the presence of sellers. The first target is Friday’s low at 97.910. Taking out this level could trigger an acceleration into the main Fibonacci level at 96.630, followed by another main bottom at 96.600.

Bullish Scenario

Overcoming and sustaining a rally over 97.140 will signal the presence of buyers. If this move creates enough upside momentum then look for the rally to possibly extend into a pair of Gann angles at 97.505 to 97.555.