U.S. Dollar Index Futures (DX) Technical Analysis – Safe-Haven Buying Boosts Greenback

The U.S. Dollar returned to its role as a safe-haven currency on Monday as optimism over “phase one” of the partial trade deal reached on Friday between the United States and China faded.

The greenback is posting gains versus the Euro, British Pound and Canadian Dollar, while losing ground to the Japanese Yen and Swiss Franc after Bloomberg News reported that China wants more talks as soon as the end of October to hammer out the details of the phase one deal.

Also underpinning demand for safe-haven currencies was a comment from U.S. Treasury Secretary Mnuchin. He said on Monday that an additional round of tariffs on Chinese imports will likely be imposed if a trade deal with China has not been reached by the time they are set to start, but added that he expected the agreement to go through.

At 16:50 GMT, December U.S. Dollar Index futures are trading 98.240, up 0.240 or +0.26%.

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart, however, momentum has been trending lower since the formation of the closing price reversal top at 99.305 on October 1.

The minor trend is down. This confirms the shift in momentum.

The main range is 96.960 to 99.305. Its retracement zone at 98.135 to 97.855 is currently being tested. It stopped the selling at 97.885 on Friday. This zone is also controlling the near-term direction of the index.

The first resistance is a 50% level at 98.435, followed by a second 50% level at 98.595.

Daily Swing Chart Technical Forecast

Based on the early price action, the direction of the December U.S. Dollar Index into the close on Monday is likely to be determined by trader reaction to the 50% level at 98.135.

Bullish Scenario

A sustained move over 98.135 will indicate the presence of buyers. If volume increases on the move then look for a potential surge into the next 50% level at 98.435.

Bearish Scenario

A sustained move under 98.135 will signal the presence of sellers. If selling volume surges then look for a move into 97.885 to 97.855.

Side Notes

Volume is well-below average on Monday because of the Columbus Day holiday. The Treasury market is closed as well as some banks. However, the major stock indexes are open. Nonetheless, the trade is extremely light.