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US Dollar Index (DX) Futures Technical Analysis – August 6, 2015 Forecast

James Hyerczyk
Daily September U.S. Dollar Index
Daily September U.S. Dollar Index

Today could be a volatile session for the September U.S. Dollar Index because of the Bank of England monetary policy decision. The direction of the index will be influenced by the vote of the Monetary Policy Committee members. For several years, the MPC members have been voting unanimously to keep interest rates at historically low levels. This could change today because there is speculation swirling that at least two members will vote to raise rates.

It’s hard to tell if this news has already been priced into the market. From the recent price action, it looks as if it hasn’t been. Maybe there has been enough speculation to underpin the GBP/USD, but there hasn’t been enough fuel a strong rally. If there is dissension today then look for the British Pound to rally. This would put pressure on the U.S. Dollar.

If the vote remains unanimous against a rate hike then look for the British Pound to weaken. This would be supportive for the U.S. Dollar.

Daily September U.S. Dollar Index

Technically, the main trend is up on the daily swing chart. Yesterday’s close at 98.03 has put the market in a position to challenge the major Fibonacci level at 98.44. This level is a potential trigger point for a sharp rally with the next potential upside target coming in at 100.31.

On the downside, the first target is an uptrending angle at 97.93. The next support is another uptrending angle at 97.68. This is followed by a major 50% level at 97.46.

The 50% level at 97.46 is also a trigger point for a possible acceleration to the downside with the next target an uptrending angle at 96.74. Further selling pressure will target the main bottom at 96.36. A trade through this price will turn the main trend to down.

The next two days are likely to feature increased volatility because of today’s BoE meeting and Friday’s U.S. Non-Farm Payrolls report. Be prepared to be active. Have a strategy. The direction of the market today and Friday is likely to be determined by trader reaction to the Fibonacci level at 98.44. Treat this level like a pivot. 

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