US Dollar Index (DX) Futures Technical Analysis – December 2, 2016 Forecast

December U.S. Dollar Index futures are trading flat shortly before the U.S. Non-Farm Payrolls report. I think the initial focus of this report will be on the headline number. The consensus is the economy added 177K jobs in November. I believe the number will come in north of 200K because of the strength of the ADP report earlier in the week.

Average hourly earnings, which is watched closely by the Fed is forecast at 0.2%, down from the previous 0.4%. The unemployment rate is expected to be unchanged at 4.9%.

The price action this week suggests the U.S. Dollar may be overvalued. U.S. Treasury yields have been rising, however, the dollar has been trading weaker. This should be a concern for bullish traders because a strong report may initially support the dollar, but the move may not last into the close.

The weakening stock market has been supportive for the funding currencies – Japanese Yen and Euro. So if stocks continue to break then the upside for the dollar may be limited, or we may see weakness in the dollar.

The bottom line, the U.S. Dollar Index may not rally even if the jobs data blows away the estimates.

Technical Analysis

The main trend is down according to the daily swing chart. A new secondary lower top has been formed at 101.880. Taking out this price and especially 102.12 will change the main trend to up. A move through 100.675 will signal a resumption of the downtrend.

The main range is 95.905 to 102.12. Its retracement zone is 99.01 to 98.28. This will be the primary downside target of the next major break.

Forecast

Based on the current price at 101.075, look for an upside bias on a sustained move over 101.370 and a downside bias to develop on a sustained move under 100.675.

Overcoming 101.370 could drive the market into a downtrending angle at 101.745, followed closely by main tops at 101.880 and 102.120.

Taking out 100.675 will signal the resumption of the downtrend. Crossing to the weak side of the downtrending angle at 100.620 will indicate the selling is getting stronger. This could lead to a test of the steep uptrending angle at 100.155.

The angle at 100.155 is the trigger point for a steep break into at least 99.01 over the near-term.