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James Hyerczyk
U.S. Dollar Index

The U.S. Dollar is trading flat against a basket of major currencies early Friday as fresh hopes for a breakthrough in U.S.-China trade talks were tempered with caution. Mixed signals on trade negotiations have been prevalent all week while evidence of the damage the trade dispute is wreaking on the global economy has grown.

At 07:23 GMT, December U.S. Dollar Index futures are trading 98.020, up 0.001 or 0.00%.

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The dollar was mostly steady early Thursday after China’s commerce ministry said the two countries are holding “in-depth” discussions, while U.S. President Donald Trump said earlier in the week a deal was close. However, the index dropped sharply after the Financial Times, citing unidentified people close to the talks, said an agreement may not be reached in time to avoid a new round of U.S. tariffs taking effect on December 15.

Prices are firming early Friday in response to comments from White House economic adviser Larry Kudlow, who said late on Thursday that the two parties were getting close to a deal and the “mood music is pretty good.”

Daily December U.S. Dollar Index

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart. A trade through 98.300 will signal a resumption of the uptrend.

The main trend will change to down on a trade through 96.960. This is highly unlikely, however, a close under 98.200 will form a weekly closing price reversal top that could trigger the start of a 2 to 3 week correction if confirmed next week.

The main range is 99.305 to 96.885. Its retracement zone at 98.095 to 98.380 has provided resistance all week. This zone is also controlling the near-term direction of the index.

The short-term range is 96.960 to 98.300. If the selling pressure continues then its 50% level at 97.630 will become the primary downside target. Since the main trend is up, buyers are likely to come in on the first test of this level.

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Daily Swing Chart Technical Forecast

Based on the early price action and the current price at 98.020, the direction of the December U.S. Dollar Index on Friday is likely to be determined by trader reaction to the main 50% level at 98.095.

Bearish Scenario

A sustained move under 98.095 will indicate the presence of sellers. Taking out yesterday’s low at 97.970 will indicate the selling pressure is increasing. This could create the downside pressure needed to drive the index into 97.630 over the short-term.

Bullish Scenario

A sustained move over 98.095 will signal the presence of buyers. If this generates enough upside momentum then look for a possible test of this week’s high at 98.300, followed closely by the main Fibonacci level at 98.380. This is a potential trigger point for an acceleration to the upside.

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