James Hyerczyk
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U.S. Dollar Index

The U.S. Dollar is trading lower late in the session on Friday against a basket of currencies and in a relatively tight range for the third consecutive session. Volume and volatility seem to have dried up after Tuesday’s reversal to the upside. That was the day that global bond yields plunged after China’s currency fell below 7 yuan to the Dollar. The price action suggests investor indecision and impending volatility. The longer the index sits in a range, the greater the breakout potential.

At 19:19 GMT, September U.S. Dollar Index futures are trading 97.320, down 0.114 or -0.12%.

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The index is mirroring the movement in the Euro, which is inching higher. The dollar is posting a gain against the British Pound, but losing to the Canadian Dollar and the safe-haven Swiss Franc and Japanese Yen. Traders are moving into the safe-haven currencies for protection over the week-end.

Daily September U.S. Dollar Index

Daily 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 98.700 on August 1. A trade through 98.700 will negate the closing price reversal bottom and signal a resumption of the uptrend.

On August 6, the index formed a minor closing price reversal bottom at 96.980. This temporarily stopped the selling. Taking it out will mean the selling is getting stronger. A trade through 96.320 will change the main trend to down.

The main range is 95.365 to 98.700. Its retracement zone at 97.030 to 96.640 is controlling the near-term direction of the index. It is also support. It stopped the selling at 96.980 on August 6.

The intermediate range is 96.320 to 98.700. The market is currently trading inside its retracement zone at 97.510 to 97.230.

The new short-term range is 98.700 to 96.980. If buyers can take out 97.510 then its retracement zone at 97.840 to 98.045 will become the primary upside target.


Daily Technical Forecast

Based on Friday’s price action and the current price at 97.320, the direction of the September U.S. Dollar Index into the close is likely to be determined by trader reaction to the 50% level at 97.510 and the 61.8% level at 97.230. Inside this zone is a pair of Gann angles at 97.32 and 97.43. The index has been bouncing around this angles all session.

Bullish Scenario

Taking out 97.510 late in the day could trigger an acceleration to the upside. Be careful buying strength, however, due to the light volume.

Bearish Scenario

Taking out 97.230 and crossing to the weak side of a steep downtrending Gann angle at 97.200 could trigger an acceleration into another 50% level at 97.030, followed by this week’s low at 96.980. This is another potential trigger point for an acceleration into an uptrending Gann angle at 96.820.

Be careful selling weakness because of the extremely low volume.

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