U.S. Dollar Index Futures (DX) Technical Analysis – Looking for Break into Retracement Zone at 97.630 to 97.472

The U.S. Dollar is trading lower against a basket of currencies early Monday in the Asian session as some optimism for the ongoing trade talks with China bolstered trade-linked currencies like the Euro and the British Pound.

Hopes for a trade deal were raised late last week and over the weekend. White House economic adviser Larry Kudlow said on Thursday that negotiations over the first phase of a trade agreement with China were coming down to the final stages, with the two sides in daily contact.

At 06:18 GMT, December U.S. Dollar Index futures are trading 97.805, down 0.066 or -0.07%.

U.S. Commerce Secretary Wilbur Ross said in an interview on Fox Business Network Friday that there was a very high probability the United States would reach a final agreement on a phase one trade deal with China.

On Saturday, according to Chinese state media, Chinese Vice Premier Liu He spoke with Treasury Secretary Steven Mnuchin and U.S. Trade Representative Robert Lighthizer about a phase-one trade deal in a phone call Saturday morning.

The two sides had “constructive discussions” about “each other’s core concerns” and agreed to remain in close contact, Xinhua reported. The call came at the request of Mnuchin and Lighthizer, according to Xinhua.

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart. A trade through 98.300 will reaffirm the uptrend. The main trend will change to down on a trade through 96.960.

The main range is 99.305 to 96.885. Its retracement zone at 98.095 to 98.380 is resistance. This zone stopped the rally at 98.300 on November 13.

The short-term range is 96.960 to 98.300. The first downside target is the retracement zone at 97.630 to 97.470. Since the main trend is up, buyers could come in on the first test of this zone.

The major support zone is 97.140 to 96.630.

Daily Swing Chart Technical Forecast

The early price action on Monday suggests the downside momentum is building. This could lead to a test of the short-term 50% level at 97.630. Watch for a technical bounce on the first test of this level.

If 97.630 fails then look for the selling to possible extend into the short-term Fibonacci level at 97.470. Once against look for buyers on the move. If this level fails then look for an acceleration to the downside with 97.140 the next likely downside target.

On the upside, the first resistance is the 50% level at 98.095. Aggressive counter-trend sellers could come in on the first test of this level. They are going to try to set up a secondary lower top.