US Dollar Index (DX) Futures Technical Analysis – Could Test June 2016 Bottom at 92.555 This Week

September U.S. Dollar Index futures closed lower on Friday, but inside Thursday’s wide range. The price action indicates investor indecision and impending volatility. There was on follow-through to the upside so Thursday’s potentially bullish closing price reversal bottom was not confirmed.

The Greenback was driven lower against a basket of currencies by weak U.S. economic data and political uncertainty.

According to the Commerce Department, U.S. Gross Domestic Product growth was up 2.6 percent in the second quarter. This was in line with expectations. The government also revised down first quarter GDP by 1.2 percent.

Also pressuring the dollar was a smaller-than-expected increase in U.S. labor costs. According to the Labor Department, wages and salaries increased 0.5 percent in the April-June period after accelerating 0.8 percent in the first quarter.

Inflation was also subdued during the second quarter. The Fed’s preferred inflation gauge, the personal consumption expenditures (PCE) price index excluding food and energy, increased at a 0.9 percent rate. That was the slowest rise in more than two years and followed a 1.8 percent rate of increase in the first quarter.

The yield on the benchmark 10-year Treasury note fell to 2.294 percent, while the yield on the 30-year Treasury Bond dropped to 2.900 percent. This was essentially the reason why the U.S. Dollar lost ground.

Technically, the main trend is down according to the daily swing chart. A trade through 94.115 will change the main trend to up. A move through 93.00 will negate Thursday’s closing price reversal bottom and signal a resumption of the down trend. This could create enough downside momentum to challenge the June 23, 2016 main bottom at 92.55.

If there is a rally, it’s going to be triggered by short-covering. The economy and the Fed’s message is bearish for the dollar and this is not likely to change over the short-term.