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U.S. Dollar Index Futures (DX) Technical Analysis – Major Retracement Zone at 97.140 to 96.630 Controlling Long-Term Direction

We’re looking for heightened volatility over the near-term because the U.S. Dollar is likely to wear many hats including investment and safe-haven currency. As an investment, it could feel pressure if U.S. Treasury yields continue to fall. As a safe-haven currency, it could rally if uncertainty over the details of the U.S.-China trade deal drive down demand for higher risk equity markets.
James Hyerczyk
U.S. Dollar Index

The U.S. Dollar is trading lower against a basket of major currencies late Friday, but attempting to post a dramatic reversal to the upside into the close. The greenback was pounded early in the session on news of an initial U.S.-China trade deal and an election victory for Britain’s Brexit-backing Conservative Party appeared to clear up some of the uncertainty on the global investment horizon, hurting safe-haven demand for the U.S. currency.

At 21:22 GMT, December U.S. Dollar Index futures are trading 97.215, down 0.169 or -0.17%.

After hitting a low at 96.715, the dollar mounted a strong intraday rebound rally which may have been fueled by hedge buying in reaction to the news that a Democratic-controlled U.S. House of Representatives committee approved charges of abuse of power and obstruction against Republican President Donald Trump on Friday, making it almost certain he will become the third American president in history to be impeached.

Daily December U.S. Dollar Index

Daily Technical Analysis

The main trend is down according to the daily swing chart. The downtrend was reaffirmed earlier in the session when sellers took out a pair of bottoms at 96.960 and 96.885.

The market found support at 96.715, inside the major retracement zone at 97.140 to 96.630. After stopping just short of the Fibonacci level at 96.630, it rallied enough to move back above the upper or 50% level at 97.140.

Daily December U.S. Dollar Index

Short-Term Outlook

The intraday rebound rally on Friday is impressive. It strongly suggests buyers are attracted to the retracement zone. This zone is controlling the longer-term direction of the index.

Holding above the 50% level at 97.140 will indicate the presence of buyers. Taking out the steep downtrending Gann angle at 97.245 will indicate the buying is getting stronger. This could trigger an acceleration to the upside if there is enough volume backing the move.

We’re looking for heightened volatility over the near-term because the U.S. Dollar is likely to wear many hats including investment and safe-haven currency. As an investment, it could feel pressure if U.S. Treasury yields continue to fall. As a safe-haven currency, it could rally if uncertainty over the details of the U.S.-China trade deal drive down demand for higher risk equity markets.

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