U.S. Dollar Index Futures (DX) Technical Analysis – Testing Important Short-Term Retracement Zone at 97.535 to 97.365

The U.S. Dollar finished lower against a basket of currencies on Friday. Traders continued to respond to lower Treasury yields and the outlook for a slowing U.S. economy that could lead to a Fed rate cut later in the year.

The catalyst behind the selling pressure was the release of weaker-than-expected U.S. manufacturing PMI data, which indicated the U.S.-China trade dispute was finally having an impact on the U.S. economy.

On Friday, the June U.S. Dollar Index settled at 97.477, down 0.246 or -0.25%.

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 98.260 on May 23 and the subsequent confirmation of the potentially bearish chart pattern on May 24.

Usually this chart pattern triggers a 2 to 3 day correction of 50% to 61.8% of the last upswing. Currently, the index is trading inside this target zone, which indicates strong downside momentum.

A trade through 98.260 will negate the closing price reversal top and signal a resumption of the uptrend. The main trend will change to down on a move through 96.81.

The short-term range is 96.810 to 98.260. The market is currently testing its retracement zone at 97.535 to 97.365. This zone is critical to the chart pattern. Since the main trend is up, buyers could show up on a test of this zone. They are going to try to form a secondary higher bottom. Look for further downside pressure if 97.364 fails as support.

The main range is 95.170 to 98.260. If the first retracement zone fails as support then look for the selling to possibly extend into the main retracement zone at 97.715 to 96.350.

Daily Swing Chart Technical Forecast

Based on Friday’s close at 97.477, the direction of the June U.S. Dollar Index over the short-term is likely to be determined by trader reaction to the Fibonacci level at 97.365.

Bearish Scenario

A sustained move under 97.365 will indicate the presence of sellers. This could trigger an acceleration to the downside since the next major target is the main bottom at 96.810.

Bullish Scenario

Holding above 97.365 will signal the presence of buyers. If this move creates enough upside momentum to take out the 50% level at 97.535 then look for the rally to possibly extend into the 50% level or pivot at 97.840.