US Dollar Index (DX) Futures Technical Analysis – Sentiment Shifts to Downside on Move Under 89.51

The Dollar rallied to close out March as investors continued to square positions ahead of the end-of-the-month and the end-of-the-quarter. Some traders believe that with money flows ending, the weakness will resume in the dollar next week.

June U.S. Dollar Index futures settled at 89.812, up 0.093 or +0.10%.

The main trend is down according to the daily swing chart. However, momentum has been trending higher since the index posted a dramatic closing price reversal bottom at 88.53 on March 27.

A trade through 90.025 will change the main trend to up. If this move creates enough upside momentum then we could see an eventual test of the March 1 top at 90.49.

A trade through 88.53 will negate the closing price reversal bottom and signal a resumption of the downtrend.

The main range is 90.49 to 88.53. Its retracement zone is 89.51 to 89.74. This zone is controlling the direction of the index. The close over this zone suggests a developing upside bias. The chances for a rally increase the longer the market can stay over the zone which is new support.

A failure to sustain a rally over the 89.51 will suggest the return of sellers. This could trigger a break back to the longer-term retracement zone at 89.16 to 88.85, followed by the main bottom at 88.53.

There’s a lot on the table to consider for U.S. Dollar traders so we’re likely to straddle the 50% level at 89.51 for a few days until the fundamentals line up to support either a shift in sentiment to the upside, or a resumption of the recent selling pressure.

Based on Thursday’s close at 89.812, the direction of the dollar index early next week is likely to be determined by trader reaction to the Fibonacci level at 89.741.

A sustained move over this level will indicate the presence of buyers. If this creates enough upside momentum then look for the rally to continue into 90.025. This price is a potential trigger point for an acceleration to the upside with 90.49 the next major target.

A sustained move under 89.741 will signal the return of sellers. This could trigger a quick move into the 50% level at 89.51. Taking out this level will shift sentiment to the downside with a steep drop into 89.16 likely.