US Dollar Index (DX) Futures Technical Analysis – May 3, 2016 Forecast

Sellers continue to pound the June U.S. Dollar Index. The weaker Australian Dollar was not enough to support the index by itself because of the tremendous bearish influence from the remarkably strong Japanese Yen and Euro.

The Aussie is trading lower after the Reserve Bank of Australia cut interest rates to a historic low. Money is flowing into the funding currencies – Japanese Yen and Euro – after a weaker than expected Chinese manufacturing report drove global equity markets sharply lower.

The main trend is down according to the daily swing chart. However, today is the seventh day down from the recent top which puts the index in a position to post a potentially bullish closing price reversal bottom. This could trigger the start of a 2 to 3 counter-trend rally.

Based on the current price at 92.225, the next downside target is a steep downtrending angle at 91.68. Crossing to the weak side of this angle will put the index in an extremely bearish position with the next target the major 50% level at 91.14.

If an intraday reversal to the upside triggers a huge rebound rally then one possible target is a downtrending angle at 93.43.

Continue to play the downside momentum, but make sure you have an exit strategy in place if you are short because the index is in the window of time to reverse to the upside.