U.S. Dollar Index Futures (DX) Technical Analysis – Trader Reaction to 96.315 to 96.540 Will Determine Near-Term Direction

The U.S. Dollar is trading sharply higher against a basket of currencies on Monday. The strength is being fueled by rising Treasury yields, which made the U.S. Dollar a more desirable investment.

Treasury yields rose after a trade truce between the U.S. and China dented investor appetite for safe-haven currencies. Investors could be pricing in the possibility the Fed will pass on a rate cut in July as they continue their “wait and see” approach to figuring out whether the economy needs easier monetary policy to keep the expansion going.

At 18:00 GMT, September U.S. Dollar Index futures are trading 96.335, up 0.610 or +0.64%.

The Dollar gapped higher against the Japanese Yen and held on to most of those gains throughout the trading session. The Euro is getting crushed. Not only is the U.S. Dollar stronger, but Euro Zone Manufacturing PMI data indicated the European Central Bank may have to ease momentary policy.

Daily Technical Analysis

The main trend is down according to the daily swing chart. However, momentum is trending higher. The trend will change to up on a move through 97.265. A move through 95.365 will negate the closing price reversal bottom and signal a resumption of the downtrend.

The minor trend is up. The trend turned higher earlier today when buyers took out 95.920. The new minor bottom is 95.560. A trade through this bottom will change the minor trend back to down. This will also shift momentum to the downside.

The major retracement zone is 96.205 to 95.850. This zone is controlling the longer-term direction of the dollar index. Crossing to the strong side of this zone is helping to generate an upside bias.

The short-term range is 97.265 to 95.365. Its retracement zone at 96.315 to 96.540 is the next upside target. This zone is important. Since the main trend is down, sellers may come in on a test of this zone. They will be trying to form a secondary lower top. Blasting through this zone will put the index in a strong position.

Daily Technical Forecast

Based on the current price at 96.335, 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 96.315.

Bullish Scenario

A sustained move over 96.315 will indicate the presence of buyers. If this generates enough upside momentum then look for the rally to possibly extend into the short-term Fibonacci level at 96.540. This is followed closely by a downtrending Gann angle at 96.705.

Bearish Scenario

A sustained move under 96.315 will signal the presence of sellers. The next two targets are 96.205 and 96.140. The latter is a potential trigger point for an acceleration into a support cluster at 95.865 to 95.850.