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James Hyerczyk
U.S. Dollar Index

The U.S. Dollar is trading higher against a basket of currencies on Wednesday after posting a dramatic closing price reversal top the previous session. All eyes are on today’s ADP Non-Farm Employment Change report, following Tuesday’s bearish ISM Manufacturing PMI report that fanned the flames of recession. That report led financial market traders to raise the chances of an October Federal Reserve rate cut from 40% to 60%.

At 11:51 GMT, December U.S. Dollar Index futures are trading 98.890, up 0.113 or +0.10%.

Today’s ADP report, due to be released at 12:15 GMT, could offer clues to traders on the strength of the labor market, or the next part of the economy to be scrutinized after Tuesday’s manufacturing report showed an unexpected decline. It is expected to show the private sector of the economy added 140,000 jobs in September, down from 195,000 the previous month.

The disappointing ISM manufacturing report is making investors nervous about the economy since it represented two consecutive months of contraction. The labor market is not in a contraction, but could be getting close.

The dollar could resume its rally if the ADP data comes in better than 140,000. A large miss to the downside should be bearish for the greenback.

Daily December U.S. Dollar Index

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart, however, yesterday’s closing price reversal top suggests momentum may be getting ready to shift to the downside.

A trade through 98.705 will confirm the closing price reversal top. This won’t change the trend, but it could trigger the start of a 2 to 3 day correction.

A move through 99.305 will negate the closing price reversal top and signal a resumption of the uptrend.

The minor range is 99.305 to 98.705. Its 50% level or pivot at 99.005 is controlling the direction of the index early Wednesday.

The short-term range is 97.560 to 99.305. Its 50% level comes in at 98.435.

The main range is 96.960 to 99.305. Its retracement zone at 98.135 to 97.860 is support.


Daily Swing Chart Technical Forecast

Based on the early price action and the current price at 98.890, the direction of the December U.S. Dollar Index the rest of the session on Wednesday is likely to be determined by trader reaction to the pivot at 99.005.

Bullish Scenario

A sustained move over 99.005 will indicate the presence of buyers. This could trigger a rally into 99.305. Overtaking this level will signal a resumption of the uptrend.

Bearish Scenario

A sustained move under 99.005 will signal the presence of sellers. Taking out 98.705 will indicate the selling is getting stronger. It will also confirm the closing price reversal top. This could trigger the start of a 2 to 3 day break with the first target 98.435, followed by 98.135 to 97.856.

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