U.S. Dollar Index Futures (DX) Technical Analysis – Watch for Volatility Spike with Release of US Manufacturing PMI Report

The U.S. Dollar is trading lower against a basket of currencies on Monday, dragged down by another plunge in U.S. Treasury yields amid increased bets on a rate cut by the Federal Reserve later in the year.

A stronger Euro is exerting the most pressure on the dollar index since the currency carries the most weight. Position-squaring ahead of the European Central Bank interest rate and monetary policy decisions on Thursday could be helping to support the single-currency.

The British Pound is trading mixed-to-lower, while the Canadian Dollar is posting a solid gain. Safe-haven demand drove the Japanese Yen and Swiss Franc lower against the dollar earlier in the session, but these losses have been offset by profit-taking tied to a slight recovery in the U.S. equity markets.

At 11:42 GMT, the June U.S. Dollar Index is trading 97.570, down 0.096 or -0.10%.

Daily Technical Analysis

The main trend is up according to the daily swing chart, however, momentum has been trending lower since the formation of the closing price reversal top on May 23 at 98.260.

A trade through 98.260 will negate the closing price reversal top and signal a resumption of the uptrend. The main trend will officially turn down on a move through 96.810.

The minor trend is down. This is helping to support the shift in momentum to the downside. A trade through 97.410 will reaffirm the minor trend.

The short-term range is 98.260 to 97.410. Its 50% level or pivot at 97.835 is controlling the direction of the dollar index today.

The intermediate range is 96.810 to 98.260. Its retracement zone at 97.535 to 97.365 is currently being tested. Buyers showed up on the first test of this level because the main trend is up.

Daily Technical Forecast

Based on the early price action, the direction of the June U.S. Dollar Index on Monday is likely to be determined by trader reaction to the intermediate 50% level at 97.535.

Bullish Scenario

A sustained move over 97.535 will indicate the presence of buyers. If this creates enough upside momentum then look for a rally into the cluster of levels at 97.750, 97.825 and 97.835. The latter is the trigger point for an acceleration into a downtrending Gann angle at 98.040.

Bearish Scenario

A sustained move under 97.535 will signal the presence of sellers. This could trigger a spike into the minor bottom at 97.410, the Fib level at 97.364 and the uptrending Gann angle at 97.280.

Overview

Look for a reaction in the Dollar Index with the release of the ISM Manufacturing PMI at 14:00 GMT. Traders are looking for a reading of 53.0.

A lower than expected number could trigger another steep drop in Treasury yields. The Euro will likely rally on the news and the Dollar Index could plunge sharply lower.

A better than expected number should drive Treasury yields lower. This should trigger a rally in the Dollar Index.