US Dollar Index (DX) Futures Technical Analysis – January 12, 2015 Forecast

March U.S. Dollar Index futures failed to make a new contract high on Friday, meeting a wall of selling pressure at 92.745, slightly below the high for the week at 92.76. The ensuing selling pressure was strong enough to create enough downside momentum into the close to perhaps trigger a follow-through move on Monday. The catalyst behind the price surge was the U.S. Non-Farm Payrolls report which showed a decline in wages.

The U.S. economy added 252K new jobs in December versus pre-report estimates of 241K and the U.S. unemployment rate fell to 5.6 percent in December, its lowest level in six-and-a-half years. But hourly earnings, an economic strength indicator, declined and its annual gain just kept up with inflation.

This news triggered the break in the U.S. Dollar Index as it could give the Fed another reason to delay its expected rate increase. The price action suggests investors used the report as an excuse to book profits and lighten up on their long positions since the hourly number has created uncertainty that needs to be addressed by the Fed at the next monetary policy meeting at the end of the month.

The minor range is 91.415 to 92.76. Its pivot price is 92.09. The weak close means sellers will go after this level from the get-go on Monday. This is the last potential support before the major long-term uptrending angle at 92.08. This angle is moving up .25 per day from the December 16 bottom at 87.83.

Taking out 92.08 with conviction could trigger the start of a major break since the daily chart indicates there is plenty of room to the downside. Based on the 87.83 to 92.76 range, the first target is its 50% level at 90.295, followed by an uptrending angle at 89.96 and the Fibonacci level at 89.71.

The tone of the market today will be determined by trader reaction to 92.08.  With the Fed not scheduled to meet until January 28 -29 to discuss the impact of the weak hourly wage figure from Friday’s jobs report, investors have an excuse to take profits and lighten up their positions over the next two weeks and aggressive counter-trend traders have an excuse to press the short-side of the market. Don’t be surprised if today’s action starts a sideways-to-lower move over the near-term.