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James Hyerczyk
U.S. Dollar Index

The U.S. Dollar is trading higher against a basket of currencies at the mid-session on Monday with most of the gain attributed to a weaker Euro and British Pound. A stronger Japanese Yen and Canadian Dollar are helping to limit gains. All of the price action is being driven by a surge in oil prices in reaction to an attack on a major Saudi Arabian production facilities.

At 16:25 GMT, December U.S. Dollar Index futures are trading 98.145, up 0.315 or +0.32%.

Traders fear that rising oil prices will along with supply-side shock and growing geopolitical tensions could damage an already fragile global economy, making the U.S. Dollar an attractive safe-haven asset.

According to MUFG analyst Lee Hardman, “Downside risks for the global economy would intensify if geopolitical risks in the region continued to escalate, creating a more unfavorable environment for high beta emerging market and high-yielding currencies,” he said.

The Japanese Yen was trading higher against the dollar because of its safe haven appeal. The Canadian Dollar was stronger because it is highly correlated with crude oil prices.

Daily December U.S. Dollar Index

Daily Technical Analysis

The main trend is down according to the daily swing chart. The trend turned down on Friday when sellers took out the previous main bottom at 97.580. A trade through 97.560 will signal a resumption of the downtrend. The main trend will change to up on a move through 98.670.

The short-term range is 98.670 to 97.560. Its 50% level or pivot at 98.115 is controlling the direction of the index on Monday.

The main range is 94.975 to 98.900. Its retracement zone at 96.940 to 96.475 is the next downside target.


Daily Technical Forecast

Based on the early price action and the current price at 98.145, the direction of the December U.S. Dollar Index the rest of the session on Monday is likely to be determined by trader reaction to the pivot at 98.115.

Bullish Scenario

A sustained move over 98.115 will indicate the presence of buyers. The next rally could be labored because of three uptrending Gann angles at 98.350, 98.480 and 98.540.

Overtaking 98.540 will indicate the buying is getting stronger with the next target the main top at 98.670, followed by a second main top at 98.900.

Bearish Scenario

A sustained move under 98.115 will signal the presence of sellers. This could trigger a retest of Friday’s minor bottom at 97.560. This is followed by an uptrending Gann angle at 97.475.

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