US Dollar Index (DX) Futures Technical Analysis – October 2, 2014 Forecast

December U.S. Dollar Index futures posted an inside move on Wednesday. This usually indicates impending volatility.

A breakout over 86.34 will reaffirm the uptrend and could trigger another acceleration.

A breakdown under 85.89 will be a sign of weakness, setting up the index for a test of the major uptrending angle at 85.57. This angle is important because it has given the market support and direction for 24 trading sessions. Just breaking this angle will not be enough to trigger a rapid sell-off. This angle is going to have to be taken out with better-than-average behind it.

The daily chart indicates there is plenty of room to break if 85.57 is taken out with conviction. The main range is 82.45 to 86.34. This means the first downside target is the 50% level at 84.40.

If this level fails as support then look for a further decline into the next support cluster at 84.01 to 83.94.

The tone of the day is likely to be determined by trader reaction to the angle at 85.57. I can’t emphasize how important this angle is to the structure of this bull market. Long investors are looking for any excuse to book profits. At the same time, sell stops have to be piling up under this angle. If the selling pressure is strong enough today then everyone is going to run for cover. The problem is, there is only one exit. This could trigger the acceleration into the retracement zone, value traders have been waiting for.