US Dollar Index (DX) Futures Technical Analysis – July 10, 2017 Forecast

September U.S. Dollar Index futures are trading slightly higher early Monday. The index is being supported by a rise in the dollar against the Japanese Yen, but being capped by a marginally higher Euro.

Spillover buying from Friday’s bigger-than-expected increase in U.S. jobs is also helping to underpin the index. The report suggests the economy is strong enough for the Fed to continue with its tightening plans for the rest of the year.

On Friday, the index was helped by the Bank of Japan which aggressively bought Japanese government bonds to push down yields, weakening the Japanese Yen. The Yen is also under pressure again on Monday due to weak economic data.

The dollar was supported by higher U.S. Treasury yields. In Asian trading, the benchmark 10-year U.S. Treasury yield stood at 2.389 percent. Late last week, it touched a more than eight-week high of 2.398 after the jobs report.

In other news, according to the U.S. Commodity Futures Trading Commission, speculators cut net long bets on the U.S. Dollar to their lowest since mid-May 2016 in the week-ended July 4. The report also showed the value of the dollar’s net long positions dropped to $135 million, from net longs of $4.5 billion the previous week. The latest week marked the first time since mid-April 2016 that net long dollar positioning fell to under $1 billion.

Finally, a poll from Reuters showed a majority of foreign exchange strategists were less bullish on the dollar than at the start of the year and more optimistic about the Euro.

Technical Analysis

The main trend is down according to the daily swing chart. The trend will change to up on a trade through 96.255. A trade through last week’s low at 95.525 will signal a resumption of the selling with the main bottom at 95.225 the next major target. Taking out this bottom will signal a resumption of the down trend.

The short-term range is 95.225 to 96.255. Its retracement zone is 95.74 to 95.62. Holding above this zone is helping to give the index a slight upside bias today. Momentum will shift back to down if this retracement zone fails as support.

Forecast

Based on the current price at 95.845 and the earlier price action, the direction of the index the rest of the day is likely to be determined by trader reaction to the downtrending angle at 95.88.

A sustained move over 95.88 will indicate the presence of buyers. This could trigger an acceleration into the downtrending angle at 96.07. This is the last potential resistance angle before the 96.255 main top.

The inability to overcome 95.88 will signal the presence of sellers. Falling below the 50% level at 95.74 will indicate the selling is getting stronger with the next targets 95.62 and 95.60. If 95.60 fails as support then look for a possible break into the next uptrending angle at 95.41. This is the last potential support angle before the 95.225 main bottom.

Basically, look for an upside bias to develop on a sustained move over 95.88 and for the downside bias to resume under 95.74.