U.S. Dollar Index Futures (DX) Technical Analysis – Direction Controlled by Short-Term Pivot at 98.435

The U.S. Dollar is trading flat against a basket of major currencies early Friday as most major players hit the sidelines ahead of today’s U.S. Non-Farm Payrolls report. On Thursday, the index closed lower for a third session after a soft U.S. service sector report fanned the flames of recession.

The chances of a rate cut by the Federal Reserve later this month rose after the release of the disappointing ISM Non-Manufacturing PMI report. Lower rates tend to make the U.S. Dollar a less-desirable investment.

Traders are now pricing in a 92.5% chance of a quarter-point rate cut at the Fed’s October meeting and a 50% chance of another reduction in December, according to the CME FedWatch tool.

At 07:06 GMT, the December U.S. Dollar Index is trading 98.535, down 0.005 or -0.01%.

Today’s U.S. Non-Farm Payrolls report will be released at 12:30 GMT. Non-Farm Employment Change is expected to show the economy added 145K jobs in September. Average Hourly Earnings are expected to have risen 0.3% and the Unemployment Rate is forecast to remain at 3.7%.

Generally speaking, a weaker-than-expected jobs report should be bearish for the U.S. Dollar as it will increase the chances of a Fed rate cut at its October 29-30 policy meeting.

Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart, however, momentum has been trending lower since the formation of the closing price reversal top on October 1 at 99.305 and its subsequent confirmation the next session.

The main trend will change to down on a trade through 97.560. A move through 99.305 will negate the closing price reversal top and signal a resumption of the uptrend.

The minor range is 99.305 to 98.300. Its 50% level or pivot at 98.805 is potential resistance.

The short-term range is 97.560 to 99.305. The index straddled its 50% level at 98.435 on Thursday.

The intermediate range is 96.960 to 99.305. Its retracement zone comes in at 98.135 to 97.855, buyers defending the trend could come in on a test of this area.

Daily Swing Chart Technical Forecast

Based on yesterday’s price action and the current price at 98.535, the direction of the December U.S. Dollar Index futures contract on Friday is likely to be determined by trader reaction to the short-term 50% level at 98.435.

Bullish Scenario

A sustained move over 98.435 will indicate the presence of buyers. If this move creates enough upside momentum then look for a test of 98.805.

Taking out the pivot at 98.805 could trigger an acceleration to the upside.

Bearish Scenario

A sustained move under 98.435 will signal the presence of sellers. This could trigger a quick break into the main 50% level at 98.135. If this fails then look for the selling to extend into the Fibonacci level at 97.856.

Side Notes

People have been asking, “Why isn’t the dollar index lower with the chance of a Fed rate cut at 92.5%?” The answer is the Euro hasn’t weakened enough. The single-currency makes up 57% of the index.

As of Thursday’s close, the Euro is up 0.20% and the Dollar Index is down 0.22% for the week.

Furthermore, the European economy has problems of its own. Additionally, the European Central Bank (ECB) is likely to cut rates again in December and may announce additional stimulus.