U.S. Dollar Index Futures (DX) Technical Analysis – Downside Momentum Could Drive Index into 97.015 – 96.780

The U.S. Dollar plunged against a basket of currencies on Friday with most of the damage done by a spike to the upside by the heavily-weighted Euro. A sharp rise by the safe-haven Japanese Yen and Swiss Franc also pressured the greenback.

The Yen and Franc jumped to multi-week highs on worries about the global economic impact of the latest coronavirus outbreak in China.

On Friday, the March U.S. Dollar Index settled at 97.213, down 0.493 or -0.50%.

U.S. data on consumer spending and personal income did push the dollar a little higher against the Yen and Euro earlier, as core consumer prices as measured by the personal consumption expenditures (PCE) index rose 0.2% last month after advancing just 0.1% the previous four months.

But the U.S. data’s impact was short-lived as investors remained transfixed on the casualties from the virus and feared its impact on the global economy.

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart, but momentum has been trending lower since the formation of the closing price reversal top at 98.005 on January 29.

A trade through 98.005 will negate the closing price reversal top and signal a resumption of the uptrend. A move through 96.815 will change the main trend to down.

The main range is 98.735 to 96.020. Its retracement zone comes in at 97.380 to 97.700. Trading on the weak side of this zone is helping to generate a downside bias. This area is new resistance.

The short-term range is 96.020 to 98.005. Its retracement zone at 97.015 to 96.790 is the first downside target. Since the main trend is up, buyers are likely to come in on a test of this zone.

The major support zone is 96.700 to 96.220. This zone is controlling the longer-term direction of the index.

Daily Swing Chart Technical Forecast

Based on last week’s price action and the close at 97.213, the direction of the March U.S. Dollar Index on Monday is likely to be determined by trader reaction to the 50% level at 97.380.

Bearish Scenario

A sustained move under 97.380 will signal the presence of sellers. This could trigger a break into the 50% level at 97.015. If this level fails as support then look for the selling to possibly extend into the main bottom at 96.815, followed by a short-term Fibonacci level at 96.780 and the major 50% level at 96.700.

The 50% level at 96.700 is a potential trigger point for an acceleration to the downside.

Bullish Scenario

A sustained move over 97.380 will indicate the presence of buyers. This could trigger a surge into the Fibonacci level at 97.700. Overtaking this level will indicate the buying is getting stronger.

The two major tops that need to be taken out in order to trigger a breakout to the upside come in at 98.005 and 98.045.