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James Hyerczyk
U.S. Dollar Index

The U.S. Dollar is trading nearly flat against a basket of major currencies early Wednesday on relatively low volume with most of the major market players on the sidelines ahead of the release of U.S. consumer inflation data and testimony by Federal Reserve Chairman Jerome Powell. A sideways move in U.S. Treasury yields is also keeping a lid on the index.

At 05:48 GMT, December U.S. Dollar Index futures are trading 98.165, up 0.014 or +0.01%.

Also contributing to the muted trade is a flat Euro, which is the highest-weighted currency in the index. It hit its lowest level since October 15 the previous session. The British Pound is also flat as traders continue to adjust positions to this week’s UK election news. The commodity-linked Canadian Dollar is losing some ground to the greenback.

As far as the safe-havens are concerned, the dollar is up slightly against the Japanese Yen, but down 0.20% versus the Swiss Franc.

The U.S. Labor Department will release its Consumer Price Index (CPI) at 13:30 GMT. It is expected to show U.S. consumer prices rose 0.3% in October in October, and at a 1.7% annual rate. The higher the numbers the better for the U.S. Dollar.

Core CPI, which excludes volatile food and energy prices, are expected to have risen 0.2% in October, after a jump of 0.1% in September. This monthly estimate would be a 2.4% increase since October of last year.

Also on Wednesday, Federal Reserve Chairman Jerome Powell will speak to the Congressional Joint Economic Committee about the current economic outlook, starting at 16:00 GMT. Investors will be looking for additive details on the central bank’s current impression of the health of the economy after the Fed cut rates on October 30 and signaled it was nearing a pause.

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart. A trade through 98.270 will reaffirm the uptrend. The main trend will change to down on a move through 96.960.

Today is the eighth day up from the last swing bottom, so the session begins with the December U.S. Dollar Index inside the window of time for a closing price reversal top. The chart pattern won’t signal a change in trend, but it will indicate the selling is greater than the buying at current price levels.

The main range is 99.305 to 96.885. Its retracement zone at 98.095 to 98.380 is currently being tested. This zone is controlling the near-term direction of the market.

The short-term range is 96.960 to 98.270. If there is a downside correction then look for the selling to possibly extend into its 50% level at 97.615.

Daily December U.S. Dollar Index

Daily Swing Chart Technical Forecast

Based on this week’s price action and the current price at 98.165, the direction of the December natural gas futures contract on Wednesday is likely to be determined by trader reaction to the main 50% level at 98.095.

Bullish Scenario

A sustained move over 98.095 will indicate the presence of buyers. If this creates enough upside momentum then look for a test of the high at 98.270, followed closely by the main Fibonacci level at 98.380. The Fib level is a potential trigger point for an acceleration to the upside.

Bearish Scenario

A sustained move under 98.095 will signal the presence of sellers. This is a potential trigger point for an acceleration to the downside with the next target the short-term 50% level at 97.615. This move is likely to be news driven.

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