U.S. Dollar Index Futures (DX) Technical Analysis – July 26, 2019 Forecast

The U.S. Dollar is trading higher against a basket of currencies early Friday, helped by firmer U.S. Treasury yields and a weaker Euro. Buyers are following through to the upside following a couple of events from Thursday.

Firstly, the European Central Bank (ECB) drove the Euro into a two-year low on Thursday when it cleared the way for a possible interest rate cut when it next meets on September 12. Secondly, a comment from ECB President Mario Draghi drove U.S. Treasury yields higher, helping to make the U.S. Dollar a more attractive investment. Draghi said he saw little chance of a recession in the Euro Zone. This led investors to believe the Fed won’t be as dovish when it releases its policy statement on July 31.

At 08:38 GMT, September U.S. Dollar Index futures are trading 97.625, up 0.120 or +0.12%.

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart. The uptrend was reaffirmed when buyers took out the May 30 main top at 97.625. This sets it up for a test of the May 23 main top at 97.715. Taking out this level could trigger an acceleration to the downside. This is likely to occur if the Euro takes out Thursday’s low at 1.1101.

The index is in no position to change the main trend to down, but it is inside the window of time to produce a potentially bearish closing price reversal top.

The minor trend is also up. A trade through 97.220 will change the minor trend to down. This will also shift momentum to the downside.

Daily Swing Chart Technical Forecast

Based on the early price action and the prolonged move up in terms of price and time, the direction of the September U.S. Dollar Index futures contract is likely to be determined by trader reaction to yesterday’s close at 97.505.

Bullish Scenario

A sustained move over 97.505 will indicate the presence of buyers. If this creates enough upside momentum then look for buyers to make a run at 97.715. This is a potential trigger point for an acceleration to the upside.

Buyers are likely to come in stronger if the U.S. Advance GDP comes in well-above expectations, or if the Euro crashes through 1.1101.

Bearish Scenario

The inability to sustain a rally and a break back under 97.505 will signal the return of sellers. This could trigger a break into the minor bottom at 97.220. If this level fails then look for an acceleration into at least 96.990.