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James Hyerczyk
U.S. Dollar Index

The U.S. Dollar is trading slightly lower against a basket of currencies on Thursday with the market trading inside Tuesday’s range for a second session, which tends to indicate investor indecision and impending volatility.

The index is basically mirroring the price action in the Euro, which is no surprise since the single-currency represents 57% of the basket. The index is also getting some support from a weaker British Pound and Swiss Franc, but gains are being capped by a stronger Japanese Yen and Canadian Dollar.

The price action suggests traders are waiting for news – good or bad. Early Thursday, the news is good, or should I say better than what occurred earlier in the week. The early gains are being supported by firmer global bond yields, a steady Chinese Yuan and increasing demand for higher risk assets. The sentiment will flip to the downside if any, or all of these factors turn negative and raise concerns about a global economic slowdown.

At 14:20, GMT, September U.S. Dollar Index futures are trading 97.475, up 0.035 or +0.04%.

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 minor closing price reversal bottom on August 6 at 96.980 has temporarily stopped the price slide.

A trade through 96.980 will negate the minor closing price reversal bottom and indicate the selling pressure is getting stronger. This could trigger a further decline into the main bottom at 96.320. A trade through this bottom will change the main trend to down.

A move through 98.700 will negate the closing price reversal top and signal a resumption of the uptrend.

The main range is 95.365 to 98.700. Its retracement zone at 97.030 to 96.640 is support. This zone stopped the selling at 96.980 on Tuesday.

The intermediate range is 96.320 to 98.700. Its retracement zone at 97.510 to 97.230 is acting like a pivot. It is currently being tested.

The short-term range is 98.700 to 96.980. Its retracement zone at 97.840 to 98.045 is the next upside target. This zone is very important. Aggressive counter-trend sellers could come in on a test of this zone. They will be trying to form a potentially bearish secondary lower top.


Daily Technical Forecast

Based on the early price action and the current price at 97.475, the direction of the September U.S. Dollar index the rest of the session is likely to be determined by trader reaction to the intermediate 50% level at 97.510 and the intermediate Fibonacci level at 97.230. Inside this zone are three Gann angles at 97.260, 97.365 and 97.450. Holding inside this zone is likely to lead to a choppy two-sided trade.

Bullish Scenario

A sustained move over 97.510 will indicate the presence of buyers. This could trigger an acceleration to the upside into the short-term retracement zone at 97.840 to 98.045.

Bearish Scenario

A sustained move under 97.230 will signal the presence of sellers. This could trigger a break into the main 50% level at 97.030, followed by 96.980 then 96.790.

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