US Dollar Index (DX) Futures Technical Analysis Forecast – Trade Through 92.040 Shifts Momentum to Upside

The U.S. Dollar on Monday rebounded against a basket of major currencies from its lowest level in 2-1/2 years, as broad risk sentiment soured again and demand for risky Wall Street assets fell, with investors worried by weakening U.S. economic data and the absence of any traction on another stimulus package. Nonetheless, the greenback fell 2.3% in November, its largest monthly percentage loss since July.

Helping to provide upside pressure for the greenback was a dip in the Euro. The single-currency slipped 0.2% against the dollar after earlier hitting a three-month high. Traders may have been influenced by the European Central Bank (ECB) which signaled earlier this year it was carefully monitoring the EUR/USD exchange rate.

Despite Monday’s reversal to the upside, the bias remains bearish as market participants remained optimistic that U.S. President-elect Joe Biden’s administration would pose few impediments to global growth, including possibly additional monetary policy support from the Federal Reserve. Both should reduce the U.S. Dollar’s safe-haven allure.

Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart, however, momentum may be getting ready to shift to the upside with the formation of a closing price reversal bottom.

A trade through 92.040 will confirm the closing price reversal bottom. This won’t change the trend to up but it could trigger the start of a 2 to 3 day counter trend rally. A trade through 91.490 will negate the potentially bullish chart pattern and signal a resumption of the downtrend.

The minor range is 92.795 to 91.490. Its 50% level at 92.145 is the first upside target.

The short-term range is 93.190 to 91.490. Its retracement zone at 92.340 to 92.540 is another potential upside target area.

Since the main trend is down, a move into these retracement levels could draw the attention of sellers.

Daily Swing Chart Technical Forecast

The direction of the December U.S. Dollar Index on Tuesday is likely to be determined by trader reaction to 92.040.

Bullish Scenario

Taking out 92.04 and sustaining the rally will indicate the presence of buyers. However, don’t expect much of a rally because of the series of resistance levels at 92.145, 92.34 and 92.540. We really can’t get too excited about a rally unless the index closes over 92.540.

Bearish Scenario

A failure to overcome 92.040 or a sustained move under this level will signal the presence of sellers. If this move creates enough downside momentum, then look for a retest of 91.490. If this level fails then look for a potential acceleration to the downside with 90.810 the next major target.

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