US Dollar Index (DX) Futures Technical Analysis – August 27, 2015 Forecast

September U.S. Dollar Index futures posted another strong gain on Wednesday, with the Greenback still picking up strength after the People’s Bank of China cut interest rates and lowered the reserve requirement for banks earlier in the week. The PBOC also flooded the market with Yuan in an effort to provide liquidity to the financial system. This activity also gave the dollar a boost.

Stronger equity indices also supported the dollar which benefited from renewed interest in the carry trade. This occurs when aggressive investors borrow low yielding currencies and invest in U.S. assets.

Despite the short-term strength, the main trend is still down with the market testing a key retracement area. This price action reflects the uncertainty surrounding the Fed’s interest rate decision in September.

The main range is 98.425 to 92.52. Its 50% level at 95.47 was tested on Wednesday. If buyers can sustain a rally over a downtrending angle at 94.93 today then look for another drive into 95.47. Overtaking this level could fuel an acceleration into the Fibonacci level at 96.17. This is followed by another downtrending angle at 96.68.

A failure to sustain a move over 94.93 will signal the presence of sellers. This could encourage further selling pressure since the next support is a major 50% level at 93.38. This is followed by a short-term low at 92.52 and a main bottom from January 12 at 92.50.

Watch the price action and read the order flow at 94.93 today. This will tell us whether the bulls or the bears are in control.