U.S. Dollar Index Futures (DX) Technical Analysis – Next Upside Target 98.095 to 98.380

The U.S. Dollar is edging lower against a basket of currencies early Wednesday after surging the previous session on the back of rising hopes for a U.S.-China trade deal and a string of solid U.S. economic data. The dollar was particularly stronger against the safe-haven Japanese Yen and Swiss Franc. A steep break in the Euro was especially beneficial to the dollar because of its weighting in the index. The greenback also inched higher against the Canadian Dollar and British Pound.

At 05:09 GMT, December U.S. Dollar Index futures are trading 97.745, down 0.060 or -0.06%. On Tuesday, the index posted at 0.45% gain.

The ISM US Non-Manufacturing PMI report rose to 54.7 from 52.6 in September, beating market expectations. On Friday, the U.S. government released a stronger-than-expected employment report. Both reports demonstrated strength in the U.S. economy, making the dollar a more desirable asset.

Daily Technical Analysis

The main trend is up according to the daily swing chart. The trend changed to up on Tuesday when buyers took out the last swing top at 97.800. The main trend will change to down on a trade through 96.960.

The major support is the retracement zone at 97.140 to 96.630. This zone stopped the selling at 96.885 on October 21 and at 96.960 on November 1.

The short-term range is 99.305 to 96.885. Its retracement zone at 98.095 to 98.380 is the first upside target. Sellers are likely to come in on the first test of this zone.

Overcoming the short-term Fibonacci level at 98.380 will indicate the buying is getting stronger and could even trigger an acceleration to the upside.

Daily Technical Forecast

Based on the early price action and the current price at 97.745, the direction of the December U.S. Dollar Index on Wednesday is likely to be determined by trader reaction to yesterday’s high at 97.825.

Bullish Scenario

A sustained move over 97.825 will indicate the buying is getting stronger. If this creates enough upside momentum then look for the rally to possibly extend into the 50% level at 98.095.

Bearish Scenario

A sustained move under 97.825 won’t be bearish per se, but it will indicate the presence of sellers. They could drive the index into a minor 50% level at 97.390. Since the main trend is down, buyers could come in on a test of this level in an effort to form a secondary higher bottom.

There are no major U.S. reports scheduled for Wednesday, but the Euro will be influenced by a report on German Factory Orders and a series of Euro Zone Services PMI reports. Another plunged in the Euro could send the Dollar Index sharply higher.

U.S. traders will be focusing on speeches from Federal Open Market Committee members Charles Evans and John Williams.