James Hyerczyk
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U.S. Dollar Index

The U.S. Dollar gave up earlier gains to finish lower against a basket of major currencies on Friday. The unsigned U.S.-China trade deal continued to fill investors with doubts and the holiday-shortened week led to low volume conditions which made the market ripe for dramatic reversals like we saw near the end of today’s trading session.

At 21:14 GMT, September U.S. Dollar Index futures were trading 98.175, down 0.113 or -0.11%.

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The Euro rose against the greenback after data showed Euro Zone Inflation accelerated faster than expected in November on a rise in food and services prices. Annual inflation rates however remained far lower than European Central Bank expectations.

The British Pound showed little reaction to political headlines, with analysts expecting little movement in the run-up to the UK general election on December 12.

Against the Japanese Yen, which tends to attract investors during times of geopolitical or financial stress as Japan is the world’s biggest creditor nation, the dollar slipped about 0.06%.

Daily December U.S. Dollar Index

Daily Technical Analysis

The main trend is up according to the daily swing chart, however, Friday’s price action indicates a closing price reversal top is forming. This won’t change the main trend to down, but if confirmed, it could lead to the start of a 2 to 3 day correction. The main trend will change to down on a trade through 97.550.

The minor trend is down. It turned down on Friday when sellers took out yesterday’s low at 98.200. This move shifted momentum to the downside.

The main range is 99.305 to 96.885. Its retracement zone is 98.095 to 98.380. This zone is controlling the longer-term direction of the dollar index. The market is likely to settle inside this zone.


Short-Term Outlook

Based on the price action during November, there is no question that the longer-term direction of the U.S. Dollar Index is likely to be determined by trader reaction to the retracement zone at 98.095 to 98.380.

The market is also trading inside a triangle formation at 98.635 to 97.790. So something major is likely to take place over the near-term since these tend to lead to major breakout moves.

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