US Dollar Index (DX) Futures Technical Analysis – June 27, 2017 Forecast

September U.S. Dollar Index futures are plunging on Tuesday in reaction to a surge in the Euro that was fueled by hawkish comments from European Central Bank President Mario Draghi. Later in the session, investors will get the opportunity to react to comments from Fed members.

Draghi set off the rally after highlighting a recovering Euro Zone economy and saying that deflationary forces had been replaced with inflationary ones, but added that stimulus in the form of the ECB’s monetary support was still needed.

These statements were perceived as hawkish by traders who believe they mean the ECB is moving closer to reducing stimulus and perhaps hiking interest rates.

At 1515, Federal Open Market Committee member Patrick Harker is scheduled to speak, followed by Fed Chair Janet Yellen at 1700 GMT. Both could move the U.S. Dollar if they discuss monetary policy and future rate hikes. Hawkish comments should help boost the dollar. Dovish comments should lead to another leg down.

Technical Analysis

The main trend is up according to the daily swing chart, but momentum has shifted to the downside. This puts the index on a course to challenge the last main bottom at 96.02. The trend will change to down on a move through this bottom. Taking out 97.515 will signal a resumption of the uptrend.

The short-term range is 96.02 to 97.515. Its retracement zone is 97.77 to 96.59. The market is currently trading on the weak side of this zone, supporting the current downside bias.

If 96.02 is taken out then look for a further break into the November 9, 2016 bottom at 95.80.

Forecast

Based on the current price at 96.48, the direction of the index the rest of the session is likely to be determined by trader reaction to the price cluster at 96.59 to 96.58.

A sustained move under 96.58 will signal the presence of sellers. This could lead to a test of the next uptrending angle at 96.30. This is the last potential support angle before the 96.02 main bottom.

Overtaking 96.59 will indicate that buyers have returned. This could trigger a short-covering rally and a test of the short-term 50% level at 96.77. This price is the trigger point for an acceleration into the next downtrending angle at 97.20.

Basically, look for the downside bias to continue on a sustained move under 96.58 and for an upside bias to develop on a sustained move over 96.59. Also look for volatility at 1515 GMT and 1700 GMT when the Fed members are scheduled to speak.