US Dollar Index (DX) Futures Technical Analysis – January 17, 2018 Forecast

A weaker Euro is helping to boost the March U.S. Dollar Index futures contract early Wednesday. The movement in the Euro is important because it is weighted about 57 percent in the calculation of the index. If the Euro starts to decline then the index should rally regardless of the direction of Treasury yields, at least over the short-run.

Daily Technical Analysis

The main trend is down according to the daily swing chart. However, today’s price action has put the index in a position to form a potentially bullish closing price reversal bottom. This chart pattern will not mean the trend is changing to up, but it could fuel the start of a 2 to 3 day rally, or a 50% retracement of the current break.

Yesterday’s close at 90.146 is the key number to watch today. Holding above this level will indicate short-covering. Closing above this level will form the reversal bottom.

On the downside, taking out today’s low at 89.960 will signal a resumption of the downtrend. The daily chart shows there is plenty of room to the downside if the selling pressure continues.

On the upside, the first two targets are a pair of former bottoms at 90.68 and 91.00.

The short-term range is 92.36 to 89.96. Overtaking the former bottoms could trigger a rally into its retracement zone at 91.16 to 91.44. Since the main trend is down, sellers are likely to show up on a test of this area.

Daily Technical Forecast

Based on the early price action, the direction of the March U.S. Dollar Index today will be determined by trader reaction to yesterday’s close at 90.146.

A sustained move over 90.146 will indicate the presence of buyers. If the current upside bias continues, we could see a test of the September 8 bottom at 90.68 and a downtrending Gann angle at 90.86.

Overtaking 90.86 could trigger a further move into 91.00 and the 50% level at 91.16.

A sustained move under 90.146 will signal the return of sellers. This could lead to a challenge of 89.96.