US Dollar Index (DX) Futures Technical Analysis – Approaching Major Retracement Zone at 94.05 to 94.815

December U.S. Dollar Index futures finished higher on Friday and higher for the week. After surviving a recent five day sell-off, the index now appears ready to attack resistance in an attempt to continue the uptrend.

One of the reasons for the recovery is investors have a little more clarity about the U.S. budget and tax reform. Questions remain, however, over President Trump’s selection for Fed Chair and, of course, there is always North Korea, which should remain a wildcard for some time.

A steep drop in the Euro contributed to most to the gains in the index. This was partially fueled by position-squaring ahead of next week’s European Central Bank’s monetary policy decision. Enhanced risk appetite also helped boost the U.S. Dollar against the Japanese Yen. The move also took place ahead of national elections in Japan on Sunday.

Daily Swing Chart Analysis

The main trend is up according to the daily swing chart. A trade through 94.100 will signal a resumption of the uptrend. A move through 92.590 will change the main trend to down.

The main range is 97.300 to 90.795. Its retracement zone at 94.05 to 94.815 is the primary upside target and retracement zone. This zone appears to be controlling the longer-term direction of the market. Overcoming 94.05 will indicate the uptrend is getting ready to resume. Taking out 94.10 could generate the momentum needed to challenge the Fibonacci level at 94.815. Overtaking out this level could launch an acceleration to the upside.

Two additional retracement zones come in at 92.66 to 92.32 and 92.45 to 92.06. The combination of these two zones forms a key support cluster at 92.45 to 92.32. These areas provided support on October 13 when the index bottomed at 92.590.

The short-term range is 94.100 to 92.590. Its 50% level is 93.345. This level is controlling the short-term direction of the market. Holding above it will help give the index an upside bias.

Look for a bullish tone of the short-term as long as 93.345 holds as support with the first upside targets 94.05 to 94.10. The latter is the trigger point for a surge to the upside.

If 93.345 fails as support and the selling increases on the move then we could see a retest of the recent bottom at 92.59. The trend will change to down if this bottom fails, however, we may not see an acceleration to the downside unless 92.06 fails as support.