US Dollar Index (DX) Futures Technical Analysis – Needs Strong Upside Momentum to Shake Out the Short-sellers

The U.S. Dollar is trading higher against a basket of major currencies shortly after the Federal Reserve’s interest rate decision and the release of its latest monetary policy statement.

At 1946 GMT, March U.S. Dollar Index futures are trading 89.110, up 0.111 or +0.12%.

The U.S. Federal Reserve ended its two-day meeting by announcing it would not raise its benchmark interest rate. However, it indicated that it expects inflation pressures to heat up as the year moves on.

The decision by the Federal Open Market Committee to leave interest rates at 1.25 to 1.50 percent was widely expected. This decision had almost no impact on the markets. However, investors were looking at the statement for clues on how the central bank might proceed for the rest of the year. This was going to be the news that moved the markets.

The news was hawkish enough to drive the index higher from a low of 88.615 reached earlier in the session.

Daily Technical Analysis

The main trend is down according to the daily swing chart. However, momentum appears to be shifting to the upside with the formation of a possible secondary higher bottom on Wednesday.

A trade through 88.255 will signal a resumption of the downtrend, but the trend will change to up on a move through 89.48.

The short-term range is 88.255 to 89.480. Its 50% level or pivot is 88.85. Holding above this level will give the index an upside bias into the close.

Another short-term range is 90.765 to 88.255. Its retracement zone is 89.51 to 89.81. Even if the trend changes to up, the buying has to be strong enough to take out this area to start picking up steam.

Daily Technical Forecast

Based on the current price action, the direction of the index into the close will be determined by trader reaction to the pivot at 88.85.

A sustained move over 88.85 will indicate the presence of buyers. There is room to the upside with 89.48, 89.51 and 89.64, potential targets, but the buying volume has to be strong.

A failure to hold 88.85 will signal the presence of sellers. This could lead to a test of an uptrending Gann angle at 88.76. If this angle fails we could see a new low for the day, followed by a test of an uptrending angle at 88.51. This is the last potential support angle before the 88.255 main bottom.