U.S. Dollar Index Futures (DX) Technical Analysis – Trader Reaction to 97.320 to 97.215 Will Set Tone on Wednesday

The U.S. Dollar declined against a basket of major currencies on Tuesday with most of the weakness attributed to a late session surge by the Euro. The whipsaw price action reflected the below average volume ahead of Wednesday’s U.S. Federal Reserve monetary policy and interest rate decisions.

The Fed is widely expected to cut its benchmark rate by 25 basis points, but investors will be more interested in what central bank policymakers have to say about future rate cuts. Most economists believe the Fed will pause in December and cut again in March 2020 so this area is going to be the source of any volatility in the greenback.

At 20:14 GMT, December U.S. Dollar Index futures are trading 97.470, down 0.054 or -0.06%.

Earlier in the session, the dollar was pressured by a weaker-than-expected Conference Board Consumer Confidence report. The data showed a reading of 125.9, below the 128.2 forecast. However, losses were minimized because the previous month was revised higher to 126.3.

Daily Technical Analysis

The main trend is down according to the daily swing chart. A trade through 97.750 will change the main trend to up. A move through 96.885 will signal a resumption of the downtrend.

The short-term range is 96.885 to 97.750. Its retracement zone at 97.320 to 97.215 is the nearest downside target. An uptrending Gann angle at 97.260 falls inside this zone, making it a valid downside target.

The major retracement zone support comes in at 97.140 to 96.630.

The main range is 99.305 to 96.885. Its retracement zone at 98.095 to 98.380 is the primary upside target.

Daily Technical Forecast

The move under the uptrending Gann angle at 97.635 has put the December U.S. Dollar Index in a weak position shortly before the close. If the selling pressure continues then look for a move into the layered support cluster at 97.320, 97.260 and 97.210. Trader reaction to this area if tested will determine the near-term direction of the index.

Aggressive counter-trend buyers are likely to come in on a test of 97.320 to 97.210 in an effort to form a secondary higher bottom. Our focus will be on this area on Wednesday. A hawkish Fed could trigger a rally from this zone with breakout potential over 97.750.