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James Hyerczyk

The U.S. Dollar soared against a basket of major currencies on Friday as economic data pointed to solid economic growth, and reduced fears of an impending slowdown. The catalyst behind the rally on Friday was strong U.S. housing data. Earlier in the week, it was better-than-expected retail sales data that supported the greenback.

On Friday, March U.S. Dollar Index futures settled at 97.359, up 0.297, or +0.31%.

U.S. homebuilding surged to a 13-year high in December as activity increased across the board, suggesting the housing market recovery was back on track amid low mortgage rates. On Thursday, U.S. retail sales increased for a third straight month in December, while a gauge of manufacturing activity in the U.S. Mid-Atlantic region rebounded in January to its highest level in eight months.

Daily March U.S. Dollar Index

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart. The main trend turned up when buyers took out the previous main top at 97.310. The rally fell just short of the next main top at 97.410.

The new main bottom is 96.810. A trade through this level will change the main trend to down.

The main range is 98.730 to 96.020. Its retracement zone at 97.375 to 97.695 is the primary upside target. It is controlling the longer-term direction of the index. On Friday, the market tested the lower or 50% level of this zone at 97.375.


Daily Swing Chart Technical Forecast

Based on Friday’s close at 97.359, the direction of the March U.S. Dollar Index on Monday is likely to be determined by trader reaction to the main 50% level at 97.375.

Bullish Scenario

A sustained move over 97.375 will indicate the presence of buyers. Taking out the main top at 97.410 will reaffirm the uptrend. This could trigger an acceleration to the upside with the next major target the main Fibonacci level at 97.695.

Bearish Scenario

A sustained move under 97.375 will signal the return of sellers. This could trigger a quick break into a minor pivot at 97.110. Since the main trend is up, buyers could come in on a test of this level. If it fails to attract buyers, then sellers may take a run at the 96.810 main bottom.

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