U.S. Dollar Index Futures (DX) Technical Analysis – Downside Momentum Strong; Looking for Test of 96.280 to 96.205

The U.S. Dollar is trading lower against a basket of currencies early Thursday as investors continue to react to dovish remarks from Federal Reserve Chairman Jerome Powell the previous session. In testimony before the House Financial Services Committee on Wednesday, Powell laid the groundwork for a rate cut later this month

At 05:49 GMT, September U.S. Dollar Index futures are trading 96.500, down 0.205 or -0.21%.

To some, the tone of Powell’s comments suggests central bank policymakers may cut its benchmark interest rates by 50-basis points in order to ensure the economy will be able to sustain its more than decade-long expansion.

Treasury yields plunged on Powell’s comments, making the U.S. Dollar a less-desirable asset against most major currencies.

Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart. However, momentum has been trending higher since the formation of the closing price reversal bottom at 95.365 on June 25.

The new main top is 96.195. A trade through this top will change the main trend to up. This is followed closely by two more main tops at 97.265 and 97.625.

A trade through 95.365 will signal a resumption of the downtrend. This is highly unlikely today, but there is room for a test of several layers of retracement level support.

The main retracement zone is 96.205 to 95.850. This zone is controlling the longer-term direction of the index. The short-term range is 95.365 to 97.195. Its retracement zone is 96.280 to 96.065.

Combining the two retracement zones creates a potential support zone at 96.280 to 96.205. Look for a technical bounce on the first test of this area.

Daily Swing Chart Technical Forecast

The early price action indicates downside momentum is controlling the trade today. If it continues then look for the selling to extend into the short-term 50% level at 96.280, followed closely by the main 50% level at 96.205. Look for counter-trend buyers on a test of these levels.

A failure to hold 96.205 will indicate the selling is getting stronger. This could trigger a further decline in 96.065, followed by 95.850.