U.S. Dollar Index Futures (DX) Technical Analysis – In Position to Close Above Short-Term Retracement Zone Resistance

The U.S. Dollar is trading lower against a basket of currencies at the mid-session on Monday as investors jockey for position ahead of a number of major central bank activities later this week. The festivities begin on Tuesday and Wednesday with the start of the U.S. Federal Reserve Federal Open Market Committee meeting and its subsequent interest rate decision and monetary policy statement. The Fed is expected to leave its benchmark interest rate unchanged, but Fed Chair Powell could open the door to further rate cuts.

At 18:09 GMT, September U.S. Dollar Index futures are trading 97.020, down 0.045 or -0.05%.

Early Wednesday, the Bank of Japan is expected to leave its benchmark rate unchanged, but its monetary policy statement could mention the need for more stimulus. The Bank of England is also expected to leave rates unchanged.

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart. The uptrend was reaffirmed earlier today when buyers inched through Friday’s high. On the upside are two targets at 97.625 and 97.715.

The trend will change to down on a trade through 95.890. This is highly unlikely, but Tuesday will be the seventh day up from the recent bottom, which puts it inside the window of time for a potentially bearish closing price reversal top.

The short-term range is 97.715 to 95.890. Its retracement zone at 96.805 to 97.020 is controlling the near-term direction of the index. Overtaking this zone will give the index an upside bias. The inability to sustain a move over this zone will signal the return of sellers. They are going to try to form a potentially bearish secondary lower top.

The main range is 94.696 to 97.715. Its retracement zone at 96.206 to 95.849 is the major support. This zone stopped the selling on June 7 at 95.890.

Daily Swing Chart Technical Forecast

Based on the current price at 97.020, the direction of the September U.S. Dollar Index into the close is likely to be determined by trader reaction to the Fibonacci level at 97.020.

Bullish Scenario

A sustained move over 97.020 will indicate the presence of buyers. Overtaking yesterday’s close at 97.065 and today’s intraday high at 97.095 will indicate the buying is getting stronger. This could trigger a late session surge to the upside. The movement in the Euro is likely to be the biggest influence on the price action.

Bearish Scenario

A sustained move under 97.020 will signal the presence of sellers. If this move creates enough downside momentum then look for the selling to possibly extend into the main 50% level 96.805. Taking out this level is likely to trigger an acceleration to the downside.