US Dollar Index (DX) Futures Technical Analysis – January 19, 2017 Forecast

March U.S. Dollar Index futures surged to the upside but remained inside this week’s range, suggesting the move was likely fueled by short-covering rather than new buying. It’s highly doubtful that investors would be taking new long positions at this time due to uncertainty over the Trump administration and this close to tomorrow’s inauguration.

Dollar investors are also getting a mixed message from U.S. officials. Earlier in the week, Trump said the dollar is “too strong” which was bearish for the dollar. Yesterday, Fed Chair Yellen said the Fed is on course to raise rates, which is bullish for the dollar.

Earlier today, the dollar picked up strength as investors reacted to solid U.S. data. A weaker Euro also supported the dollar’s rise. The EUR/USD tumbled after European Central Bank chief Mario Draghi mentioned concerns about sagging inflation and the need for further monetary policy assistance.

Technical Analysis

The main trend is down according to the daily swing chart. A trade through 100.235 will signal a resumption of the downtrend. Momentum is still down, but the market appears to be consolidating.

The main range is 99.25 to 103.815. Its retracement zone is 101.535 to 100.995. The market is currently trying to establish a support base inside this zone.

The short-term range is 103.815 to 100.235. If there is a breakout to the upside then its retracement zone at 102.025 to 102.45 becomes the primary upside target.

Forecast

Based on the early price action, the support is a price cluster at 100.04, 100.995 and 101.07. We’re looking for an upside bias as long as buyers can hold the market over 101.07. The next key level is the 50% price at 101.535. Overcoming this level could drive the market into the next 50% level at 102.025.

A sustained move under 100.94 will indicate the presence of sellers. The daily chart is open to the downside with the next target this week’s low at 100.235, followed closely by a long-term uptrending angle at 100.09.

Look for low volume the rest of the session. Be careful buying strength and selling weakness unless you have volume on your side.