U.S. Dollar Index Futures (DX) Technical Analysis – Trader Reaction to 96.67 Set Tone This Week

The U.S. Dollar closed lower against a basket of currencies last week with the weakness primarily driven by a surge in the Euro. Pressuring the dollar against most of the majors was a plunge in U.S. Treasury yields, which made the dollar a less-desirable investment.

The catalysts behind the weakness were dovish comments from Federal Reserve Chairman Jerome Powell and weaker-than-forecast U.S. Non-Farm Payrolls data. Powell opened the door to a sooner-than-expected Fed rate cut, and the jobs report raised the odds of a June or July rate cut.

Last week, June U.S. Dollar Index futures settled at 96.490, down 1.176 or -1.20%.

Weekly Technical Analysis

The main trend is down according to the weekly swing chart. The trend turned down last week when sellers took out the main bottom at 96.810. The next potential downside target is the main bottom at 95.170. A trade through 98.260 will change the main trend to up.

The main range is 92.420 to 98.260. Its retracement zone at 95.340 to 94.650 is the primary downside target.

Weekly Technical Forecast

Based on last week’s price action and the close at 96.490, the direction of the June U.S. Dollar Index this week is likely to be determined by trader reaction to the downtrending Gann angle at 96.67.

Bearish Scenario

A sustained move under 96.67 will indicate the presence of sellers. The daily chart is open to the downside so we could see an acceleration with the next target angle coming in at 95.920. If this fails to hold as support then look for the selling to possibly extend into the next uptrending Gann angle at 96.90 and the 50% level at 95.340.

Bullish Scenario

A sustained move over 96.67 will signal the presence of buyers. This could create a labored rally because the index would have to overcome uptrending Gann angles at 96.90 and 97.170 in order to generate any strong upside momentum.

Overview

The catalyst behind the price action this week will be U.S. Treasury yields. Early in the week, we’ll be looking to see if the U.S. postponement of tariffs against Mexico helps turn yields higher. This could trigger a short-covering rally in the dollar index. At mid-week, investors will get the opportunity to react to U.S. consumer inflation data. The outcome of this report could determine whether the Fed cuts rates in June or July, or not at all.