U.S. Dollar Index Futures (DX) Technical Analysis – Testing Short-Term Retracement Zone at 97.840 to 98.050

The U.S. Dollar is trading higher against a basket of major currencies late Wednesday. The move is primarily being driven by the weaker Euro. Sellers started hitting the single-currency after Germany’s gross domestic product fell 0.1% quarter-on-quarter after growing 0.4% in the first quarter, the latest sign that the trade dispute between the United States and China is having a damaging effect on Europe’s biggest economy.

At 18:43 GMT, September U.S. Dollar Index futures are trading 97.830, up 0.199 or +0.20%.

The greenback is losing ground to the Japanese Yen on fears of a global recession. These concerns were sparked when the 2 year and 10 year U.S. Treasury note yield inverted, signaling a possible recession in the U.S. in about 22 months on average.

Daily Technical Analysis

The main trend is up according to the daily swing chart. A trade through 98.700 will signal a resumption of the uptrend.

A new main bottom was formed at 96.980. A trade through this bottom will change the main trend to down.

The main range is 95.365 to 98.700. Its retracement zone at 97.030 to 96.640 is controlling the near-term direction of the index. This zone is support. It stopped the selling on August 6 at 96.980.

The intermediate range is 96.320 to 98.700. Its retracement zone at 97.510 to 97.230 is acting like a pivot. Trading on the strong side of this zone today is helping to give the index an upside bias.

The short-term range is 98.700 to 96.980. Its retracement zone at 97.840 to 98.045 is the first upside target. This zone is very important to the structure of the market. Aggressive counter-trend sellers may step in on a test of this zone in an effort to form a potentially bearish secondary lower top. Taking out the upper end of this zone at 98.045 will indicate the buying is getting stronger.

Daily Technical Forecast

Based on today’s price action and the current price at 97.83, the direction of the September U.S. Dollar Index into the close is likely to be determined by trader reaction to the short-term 50% level at 97.840.

Bullish Scenario

A sustained move over 97.840 will indicate the presence of buyers. If this move creates enough upside momentum then look for the rally to extend into the short-term Fibonacci level at 98.045, followed by the downtrending Gann angle at 98.140.

Bearish Scenario

A sustained move under 97.840 will signal the return of sellers. If this creates enough downside momentum then look for the selling to possibly extend into an uptrending Gann angle at 97.615, followed by a support cluster at 97.510.