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James Hyerczyk
U.S. Dollar Index

The U.S. Dollar finished higher against a basket of major currencies on Friday with rising Treasury yields continuing to make the greenback a more attractive investment. Optimism over a U.S.-China trade deal was primarily behind the rise in yields. It also drove down the safe-haven Japanese Yen and Swiss Franc.

On Friday, December U.S. Dollar Index futures settled at 98.201, up 0.212 or +0.22%.

A plunge in the Euro exerted the most upside pressure on the dollar index. The single-currency dropped to a new three-week low against the dollar on Friday just one day after the European Union slashed its growth forecasts for the Euro Zone, saying global trade tensions are set to weigh on the region and limit economic expansion.

Long-term U.S. government debt yields climbed higher on Friday, capping a week of gains, as warmer trade relations between Washington and Beijing boosted demand for equities, while pressuring Treasury bonds.

Furthermore, the yield curve, which inverted over the summer and stoked recession fears, also steepened to the widest since January on Thursday.

Daily December U.S. Dollar Index

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart. The trend turned up on November 5 when buyers took out the last main top at 97.800. The new main bottom is 96.960. A trade through this bottom will change the main trend to down.

The index is currently up five sessions from its last main bottom which means in two more days, traders should start watching for a closing price reversal top.

The main range is 99.305 to 96.885. Its retracement zone at 98.095 to 98.380 is currently being tested. Trader reaction to this zone is likely to determine the near-term direction of the dollar index.

The rolling range is 96.960 to 98.245. Its 50% level is 97.600. This is a potential downside target and support.

The major support zone is 97.140 to 96.630. It stopped the selling at 96.960 on November 1 and at 96.885 on October 21.

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Daily Swing Chart Technical Forecast

Based on Friday’s close at 98.201, the direction of the December U.S. Dollar Index on Monday is likely to be determined by trader reaction to the main 50% level at 98.095.

Bullish Scenario

A sustained move over 98.095 will indicate the presence of buyers. If this creates enough upside momentum then look for a potential move into the main Fibonacci level at 98.380. This level is a potential trigger point for an acceleration to the upside with the next targets a minor top at 98.955 and a main top at 99.305.

Bearish Scenario

A sustained move under 98.095 will signal the return of sellers. If this move generates enough downside momentum then look for the selling pressure to possibly extend into the 50% level at 97.605.

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