US Dollar Index (DX) Futures Technical Analysis – July 14, 2017 Forecast

September U.S. Dollar Index futures are trading flat-to-lower shortly before the release of reports on U.S. Consumer Inflation and Retail Sales for June at 1230 GMT.

Today’s CPI report has taken on added importance after Fed Chair Janet Yellen expressed deeper concerns over the persistently weak inflation during her testimony before the Senate Banking Committee earlier this week.

With the U.S. economy nearing full-employment, inflation has become the primary driver of monetary policy. In raising interest rates four weeks ago, the Federal Reserve dismissed three months of decelerating consumer price gains as “transitory”. They have been expecting the strengthening labor market to eventually push up wages, but this hasn’t happened.

The CPI for June is expected to come in at 0.1%, slightly above the -0.1% previous read. Core CPI is forecast at 0.2%, up slightly from 0.1%. A better-than-expected number should be bullish for the U.S. Dollar Index.

Higher inflation will trigger a rise in U.S. Treasury yields which will make the U.S. Dollar a more attractive investment.

Core Retail Sales for June are expected to show a 0.2% increase, up from the May read at -0.3%. Retail Sales are expected to show a 0.1% gain, better than the previous -0.3. A better-than-expected number will underpin the U.S. Dollar, but shouldn’t have the same impact as the CPI report.

Technical Analysis

The main trend is down according to the daily swing chart. A trade through 95.245 will signal a resumption of the selling. A move through 95.225 will reaffirm the downtrend. This could trigger enough downside momentum to challenge the September 22, 2016 main bottom at 94.97.

A move through 95.96 will change the main trend to up. This could trigger a further rally into the next main top at 96.255.

The short-term range is 95.225 to 96.255. Its retracement zone at 95.62 to 95.74 is both resistance and a major pivot zone.

On upside, the major target is the 50% level at 96.37.

Forecast

Based on the current price at 95.435 and the earlier price action, the direction of the index today is likely to be determined by trader reaction to the Fib level at 95.618.

A sustained move under 95.618 will indicate the presence of sellers. Holding below the downtrending angle at 95.59 will indicate the selling is getting stronger. This could trigger an acceleration to the downside into the low at 95.245, the main bottom at 95.225 and the steep downtrending angle at 95.21.

Crossing to the weak side of the angle at 95.21 will put the index in a bearish position with the next major target 94.97.

Overcoming the angle at 95.59 will signal the presence of buyers. This could lead to a quick move into the Fib at 95.62. This price is the trigger point for an acceleration into the 50% level at 95.74, a short-term downtrending angle at 95.77 and a long-term downtrending angle at 95.79.

The trigger point for an even stronger breakout is 95.79. This could lead to a test of the main top at 95.96, followed by another downtrending angle at 96.04.

Basically, look for an upside bias to develop on a sustained move over 95.62, and the downside bias to continue on a sustained move under this level.