US Dollar Index (DX) Futures Technical Analysis – Hawkish Fed Will Trigger Short-Covering Rally

March U.S. Dollar Index futures are trading lower early Wednesday. The price action could be suggesting to things. One, investors don’t expect the Fed to alter its monetary policy statement enough to support the dollar. Two, investors may be expressing disappointment in President Trump’s State of the Union address because he failed to reiterate his support for the U.S. Dollar.

At 1900 GMT, the U.S. Federal Reserve will release its latest monetary policy statement and interest rate decision. The Fed is not expected to raise rates at this meeting. Hawkish investors are hoping the central bank talks about raising rates more aggressively this year. Traders will also react to any news about rising inflation. Dovish investors expect the Fed to maintain its forecast for 2 to 3 rate hikes this year and tame inflation.

Daily Swing Chart Analysis

The main trend is down according to the daily swing chart. A trade through 88.255 will signal a resumption of the downtrend. This could lead to a test of the December 16, 2014 main bottom at 88.067. This is the trigger point for a possible acceleration to the downside.

The trend won’t change to up unless 90.765 is taken out, but moving above yesterday’s high at 89.48 will signal that the short-covering is getting stronger.

The short-term range is 88.255 to 89.48. Its 50% level or pivot is 88.87. This price is controlling the direction of the market today.

The intermediate range is 90.765 to 88.255. Its retracement zone at 89.51 to 89.81 is resistance. This zone stopped the rally on Tuesday.

The main range is 92.36 to 88.255. If the rally continues today then we could see a test of its retracement zone at 90.31 to 90.79.

Daily Swing Chart Forecast

Based on the early trade, the direction of the dollar index today is likely to be determined by trader reaction to the pivot at 88.87.

A sustained move under 88.87 will signal the presence of sellers. This could trigger an acceleration into 88.255, followed closely by 88.07.

A sustained move over 88.87 will indicate the presence of buyers. This could fuel an acceleration into 89.48, 89.51 and 89.81.