U.S. Dollar Index Futures (DX) Technical Analysis – Establishing Support at 98.350 to 98.120Based on the early price action and the current price at 98.395, the direction of the September U.S. Dollar Index on Tuesday is likely to be determined by trader reaction to the short-term 50% level at 98.350.
The U.S. Dollar is trading slightly higher on Tuesday against a basket of currencies. The price action is basically reflecting the movement in the Euro, which is the dominant current in the dollar index. The greenback is trading inside last Thursday’s wide range for a third session, suggesting investor indecision and impending volatility. However, we’re not likely to much movement in the index until the European Central Bank’s interest rate and policy decision on Thursday.
At 08:51 GMT, September U.S. Dollar Index futures are trading 98.395, up 0.147 or +0.15%.
Weaker safe-haven currencies – Japanese Yen and Swiss Franc – have been underpinning the dollar for several days, or since China announced the resumption of trade talks with the United States in early October, on September 5.
Traders still aren’t sure how to play the Euro ahead of Thursday’s ECB meeting. There is just too much to process at this time so traders are keeping their powder dry. Two weeks ago the market was pricing in an aggressive response from the central bank, causing the single currency to plunge and the U.S. Dollar Index to spike higher. Comments from future ECB President Christine Lagarde last week and a Reuters report earlier today have caused investors to revise down their expectations.
Daily Technical Analysis
The main trend is up according to the daily swing chart. A trade through 99.330 will signal a resumption of the uptrend. A move through 97.370 will change the main trend to down.
The short-term range is 97.370 to 99.330. Its retracement zone at 98.350 to 98.120 is support. The index has been testing this range for four consecutive sessions.
The main range is 96.980 to 99.330. Its retracement zone at 98.160 to 97.880 is also support. It’s controlling the near-term direction of the index.
The combination of the two retracement zones creates a support cluster at 98.160 to 98.120.
Daily Technical Forecast
Based on the early price action and the current price at 98.395, the direction of the September U.S. Dollar Index on Tuesday is likely to be determined by trader reaction to the short-term 50% level at 98.350.
A sustained move over 98.350 will indicate the presence of buyers. If this creates enough upside momentum then look for a rally into a resistance cluster at 98.685 to 98.705.
A sustained move under 98.350 will signal the presence of sellers. This could trigger a break into the support cluster at 98.160 to 98.120, followed closely by an uptrending Gann angle at 98.059.
Don’t expect much movement unless volatility hits the Euro.