James Hyerczyk
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U.S. Dollar Index

The U.S. Dollar continues to tread water this week. With volume and volatility below average ahead of next week’s European Central Bank (ECB) policy meeting and the U.S. Federal Reserve’s interest rate decision on July 31, traders have been reluctant to swing the greenback in either direction. Today’s price action is being driven by a recovery in U.S. Treasury yields after early session weakness put a cap on the dollar.

At 13:47 GMT, September U.S. Dollar Index futures are trading 96.885, up 0.015 or +0.02%.

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Yields rebounded, triggering a slight recovery in the U.S. Dollar Index after the Philly Fed Manufacturing Index soundly beat the 5.0 estimate with a 21.8 reading. Additionally, weekly unemployment claims hit the 216K estimate. The news likely caps the chances of a 50-basis point rate cut at the end of July.

Daily September U.S. Dollar Index

Daily Swing Chart Technical Analysis

The best way to study the price action today is with the swing chart. There isn’t enough volatility to make the Gann angles relevant. The daily chart pattern is mirroring the movement in the Euro, which is no surprise since the Euro is 57% of the index.

I don’t expect to see any major movement in the dollar index or the Euro until after the ECB meeting. At this time, the trade is probably being dominated by the “bots”.

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 on June 25 at 95.365. Furthermore, the secondary higher bottom at 96.375 is also contributing to the upside bias.

The main trend changes to up on a trade through 97.195. This is followed closely by another main top at 97.265. This is a potential trigger point for an acceleration into tops at 97.625 and 97.715.

A trade through 96.375 will shift momentum to the downside and trigger a resumption of the downtrend.

The short-term range is 96.375 to 97.100. Its 50% level or pivot at 96.740 is controlling the direction of the index today.

The main range is 95.365 to 97.195. Its retracement zone at 96.280 to 96.065 is additional support. The major support zone is 96.205 to 95.850.


Daily Swing Chart Technical Forecast

Based on the early price action, the direction of the September U.S. Dollar Index the rest of the session is likely to be determined by trader reaction to the pivot at 96.740.

Bullish Scenario

A sustained move over 96.740 will indicate the presence of buyers. If this creates enough upside momentum then look for buyers to make a run at the two tops at 97.100 and 97.195.

Bearish Scenario

A sustained move under 96.740 will signal the presence of sellers. This could trigger an acceleration to the downside with the next targets 96.375, followed by a pair of 50% levels at 96.280 and 96.205.

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