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James Hyerczyk
U.S. Dollar Index

The U.S. Dollar is trading lower against a basket of currencies on Monday, following a massive short-covering rally on Friday that produced a closing price reversal bottom. The catalysts behind the reversal were stronger-than-expected U.S. Non-Farm Payrolls and consumer sentiment reports.

There has been no follow-through to the upside so the potentially bullish chart pattern hasn’t been confirmed. This is further proof that Friday’s move was fueled by short-covering. We may not get a follow-through either unless there is bullish news about the economy, a trade deal or the Fed is extremely hawkish on Wednesday.

At 09:26 GMT, December U.S. Dollar Index futures are trading 97.625, down 0.036 or -0.04%.

A strong Euro and British Pound are contributing to the dollar index weakness as well as demand for the safe-haven Japanese Yen and Swiss Franc.

Stocks are trading lower along with Treasury yields. These are early signs that there is risk in the market early Monday.

Daily December U.S. Dollar Index

Daily Technical Analysis

The main trend is down according to the daily swing chart. A trade through 97.200 will signal a resumption of the downtrend. A move through 98.495 will signal a resumption of the uptrend.

A trade through 97.815 will confirm the closing price reversal bottom. This will also shift momentum to the upside.

On the downside, the major support is a retracement zone at 97.140 to 96.630.

The short-term range is 98.495 to 97.200. Its retracement zone at 97.850 to 98.000 is the next upside target. Since the main trend is down, sellers could come in on a test of this zone.

The main range is 99.305 to 96.885. Its retracement zone at 98.110 to 98.390 is also resistance. It is controlling the longer-term direction of the market.


Daily Technical Forecast

Based on the early price action, and the current price at 97.625, 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 downtrending Gann angle at 97.745.

Bearish Scenario

A sustained move under 97.745 will indicate the presence of sellers. This could trigger a break into the uptrending Gann angle at 97.420, followed by Friday’s reversal bottom at 97.200.

Bullish Scenario

Taking out 97.745 will signal the presence of buyers. This could trigger a rally into the short-term 50% level at 97.850 and the short-term Fibonacci level at 98.000.

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