US Dollar Index (DX) Futures Technical Analysis – Bigger Plunge Coming if 90.385 is Taken Out With Conviction

March U.S. Dollar Index futures plunged on Friday in reaction to a steep rise in the Euro. The single-currency surged to a three-year high against the dollar on hopes that the European Central Bank is preparing to reduce its vast monetary stimulus program.

Investors continued to build on the rally which began on Thursday after ECB policymakers said in minutes of the bank’s December meeting that they could revisit their communication stance in early 2018.

Investors read the minutes as a signal that the ECB will wind down its 2.55 trillion Euro ($3.10 trillion bond purchase scheme this year if Europe’s economy continues to hum along.

Daily Technical Swing Chart Analysis

The main trend is down according to the daily swing chart. On Friday, sellers took out a pair of main bottoms at 91.51 and 91.47. This triggered an acceleration into the September 20, 2017 main bottom at 90.830, falling just short of the September 8, 2017 main bottom at 90.385.

The main bottom at 90.385 is very critical to the structure of the chart pattern. Therefore, we may see a technical bounce on the first test of this level. However, if it fails then prepare for another steep sell-off.

Taking out 90.385 with conviction could trigger an acceleration to the downside into a pair of bottoms at 88.067 and 87.682. If they fail then look for the move to continue into the October 17, 2014 main bottom at 84.977.

Momentum is on the side of the short-sellers. The only way to stop this type of sell-off is with a closing price reversal bottom. Even then, it will probably only lead to a short-term counter-trend retracement rally while giving the bears better prices to short.