US Dollar Index (DX) Futures Technical Analysis – Bearish Under 91.61; Next Major Target 88.87

September U.S. Dollar Index futures plunged last week, weighed down by a number of factors including concerns about the economy, a dovish Fed member, a bullish Euro and geopolitical concerns.

Dollar investors are currently worried about the impact of Hurricanes Harvey and Irma on the economy. Last week, unemployment claims soared due to the loss of jobs in Texas because of Harvey. Labor market conditions could worsen next week because of Hurricane Irma’s impact on Florida’s economy.

FOMC Member Lael Brainard made dovish comments last week that indicated the Fed is likely to refrain from hiking interest rates later this year.

The European Central Bank decided to leave interest rates at historically low levels while ECB President Mario Draghi expressed concerns about the value of the Euro. Investors didn’t seem to care, instead focusing on the ECB’s decision to begin tapering its stimulus later this year.

The dollar was also punished by concerns that the situation in the Korean Peninsula may be escalating. This news drove investors into safe haven assets like gold and the Japanese Yen.

Weekly Technical Analysis

The main trend is down according to the weekly swing chart. Momentum is also trending lower. A trade through 94.055 will change the main trend to up.

The index also closed inside a major 50% to 61.8% retracement zone at 91.61 to 88.87.

Weekly Forecast

Based on last week’s close at 91.326, the direction of the U.S. Dollar this week is likely to be determined by trader reaction to the major 50% level at 91.61.

A sustained move under 91.61 will signal the presence of sellers. The daily chart is wide open to the downside so we could see an acceleration into the major Fibonacci level at 88.87 over the near-term.

Overcoming and sustaining a move over 91.61 will indicate the presence of buyers. This could trigger a short-covering rally into the nearest downtrending angle at 92.06. This angle has been guiding the market lower for three weeks.

Crossing to the strong side of the downtrending angle at 92.06 will put the index in a bullish position with the next likely target angle coming in at 93.06.

Basically, we can stay short as long as the index remain under 91.61.