US Dollar Index (DX) Futures Technical Analysis – Politics, Fed Minutes Wipe Out Dollar’s Gains

September U.S. Dollar Index futures gave up all of its earlier gains after President Trump tweeted that he would disband his advisory councils filled with leaders of corporate giants. The sell-off continued with the dollar hitting its session low after the minutes from the Federal Reserve’s July meeting showed a split between FOMC members who wanted to stay the course and continue to raise rates and those who preferred the Fed slow down the process.

Policymakers did agree, however, that the process of reducing the Fed’s balance sheet should begin “relatively soon.” Some members argued that there needs to be a more detailed plan worked out.

Before Trump’s announcement and the Fed minutes, the dollar index had risen for a third straight session and reached its highest level since July 21 before turning lower. The catalyst this week was increased expectations for a rate hike later this year and a cooling of geopolitical fears, however, all of that optimistic news was wiped out by this afternoon’s events.

Technical Analysis

Earlier in the session, the index took out the July 26 top at 94.115, but fell short of 50% level at 94.175.

The main trend is up according to the daily swing chart, but the current prolonged rally had put the index in the window of time for a potentially bearish closing price reversal top. Today’s price action has put the market in a position to form the higher-low, lower-close chart pattern.

If we do get the closing price reversal top and its confirmed on Thursday then look for a minimum 2 to 3 day correction. The first target is a retracement zone at 93.49 to 93.33. The second target zone comes in at 93.20 to 93.06.

A trade through 92.83 will turn the main trend to down.