U.S. Dollar Index Futures (DX) Technical Analysis – Weakens Under 97.170, Strengthens Over 97.405

The U.S. Dollar closed lower against a basket of currencies on Monday after an early session rally failed to attract enough buyers to extend the move much beyond last week’s high.

The Euro finished higher against the greenback, contributing the most to the index’s loss. The dollar also lost ground to the Canadian Dollar and the safe-haven Japanese Yen and Swiss Franc. Another sharp break in the British Pound helped offset some of the weakness.

On Monday, the March U.S. Dollar Index settled at 97.235, down 0.039 or -0.04%.

The Canadian Dollar shook off early weakness against the greenback to post a modest gain. Canada’s economy unexpectedly shrank by 0.1% in October, the first monthly decline since February, partly because of a U.S. auto strike that hit manufacturing, Statistics Canada data indicated on Monday.

The Sterling fell to a three-week low against the dollar, pulled down in holiday-thinned trade by nagging concern over the British government’s hard line on Brexit talks.

Over the short-run, the U.S. Dollar has been supported since Washington and Beijing came to an interim trade agreement earlier this month. The future path of the dollar, however, will likely be determined by what kind of benefits non-U.S. currencies reap from the easing of tensions between the United States and China.

Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart. A trade through 98.045 will change the main trend to up. A move through 96.295 will signal a resumption of the downtrend.

On Monday, the dollar index formed a closing price reversal top. This may be an indication that the short-term counter-trend rally is completed. A trade through 97.405 will negate the closing price reversal top, while a trade through 97.170 will confirm the potentially bearish chart pattern.

The main range is 94.665 to 98.735. Its retracement zone at 96.700 to 96.220 is major support.

The short-term range is 98.045 to 96.295. Its retracement zone at 97.170 to 97.380 is resistance. This zone stopped the selling on Monday.

The new minor range is 96.295 to 97.405. If the closing price reversal top is confirmed then its 50% level at 96.850 will become the next downside target.

Daily Swing Chart Technical Forecast

Based on Monday’s price action and the close at 97.235, the direction of the March U.S. Dollar Index on Tuesday is likely to be determined by trader reaction to the 50% level at 97.170.

Bearish Scenario

A trade through 97.170 will indicate the presence of sellers. If this generates enough downside momentum then look for the selling to possibly extend into the minor 50% level at 96.850.

Bullish Scenario

A sustained move over 97.170 will signal the presence of buyers. The first upside target is 97.380, followed closely by 97.405. Taking out 97.405 could trigger an acceleration to the upside.