U.S. Dollar Index Futures (DX) Technical Analysis – Taking Out 96.700 Could Trigger Strong Counter-Trend Rally

The U.S. Dollar is in a position to close lower, but well off its lows against a basket of major currencies on Monday. The dollar is under pressure as investors await further details on the U.S.-China trade agreement.

Most of today’s weakness is being attributed to the stronger Euro, which makes up about 57% of the index. The British Pound is trading flat after posting a strong gain on Friday in reaction to the results of the U.K.’s general election which should lead to Britain leaving the European Union in January. The dollar is also trading higher versus the safe-haven Japanese Yen due to strong demand for risky assets.

At 21:05 GMT, March U.S. Dollar Index futures are trading 96.600, down 0.145 or -0.15%.

Daily Technical Analysis

The main trend is down according to the daily swing chart. A trade through 96.295 will signal a resumption of the downtrend.

The main trend will change to up on a move through 98.045. This is highly unlikely, but the index is down 11 sessions from its last main top, which puts it in the window of time for a potentially bullish closing price reversal bottom.

The minor trend is also down. A trade through 97.400 will change the minor trend to up. This will also shift momentum to the upside.

The main range is 94.665 to 98.735. Its retracement zone at 96.700 to 96.220 is currently being tested. This zone is controlling the longer-term direction of the dollar index.

If a short-term range develops between 98.045 to 96.295 then don’t be surprised by a near-term surge into its retracement zone at 97.170 to 97.380.

Short-Term Outlook

On Monday the index straddled a pair of Gann angles at 96.670 and 96.590. This took place inside the major retracement zone at 96.700 to 96.220.

The price action suggests buyers are trying to trigger a breakout over 96.700. If this successful, this could trigger an acceleration to the upside.

Continuing to follow the downtrending Gann angle at 96.670 will indicate the presence of strong sellers. This move could lead to a retest of Friday’s low at 96.295 and the main Fibonacci level at 96.220.