US Dollar Index (DX) Futures Technical Analysis – February 21, 2017 Forecast

March U.S. Dollar Index futures gapped higher on the opening on Tuesday after yesterday’s bank holiday and never looked back. The market is being driven higher by a steep drop in the Euro in reaction to election fears in France, and growing speculation the Fed will raise rates in March.

Early in the session, U.S. government debt prices were trading lower. This means that yields were rising. Later in the session, the Treasury Department will release the results of the sale of $26 billion in two-year notes. This news could move the U.S. Dollar Index.

Tuesday’s U.S. data includes the Flash Manufacturing PMI report, which is expected to come in at 54.7, down slightly from the previous 55.0 and Flash Services PMI, which is expected to reach 55.8, up from 55.6.

Last week, Fed Chair Janet Yellen signaled that the U.S. economy was ready for a rate hike. On Tuesday, we’ll hear from the hawkish Patrick Harker. Fed Board Governor Jerome Powell will speak on Wednesday, when the Fed will release the minutes of the last monetary policy meeting. Cleveland Fed President Loretta Mester said on Monday she would be comfortable raising rates at this point if the economy kept performing the way it did.

Technical Analysis

The main trend is up according to the daily swing chart. A trade through 101.75 will negate a closing price reversal top and signal the resumption of the uptrend. If this occurs then 100.40 will become the new swing bottom.

The main range is 103.815 to 99.195. Its retracement zone at 101.505 to 102.050 is the primary upside target. The lower or 50% level of this zone is currently being tested. This zone is very important to the longer-term structure of the market.

The short-term range is 99.195 to 101.75. Its retracement zone at 100.473 to 100.175 is support. This zone stopped the break last week at 100.40.

Forecast

Based on the current price at 101.560, the direction of the index today is likely to be determined by trader reaction to the price cluster at 101.50.

A sustained move over 101.50 will signal the presence of buyers. This is followed by a longer-term angle at 101.69 and the main top at 101.75.

Look for an acceleration to the upside on a move through 101.75. The next target is the major Fib at 102.05. This is the trigger point for an even steeper rally into the next downtrending angle at 102.75.

A sustained move under 101.50 will indicate the presence of sellers. If buyers fail to overcome this level then look for a possible pullback into the uptrending angle at 100.82.

Simply stated, 101.50 is the major pivot today. It’s controlling the direction of the market.