US Dollar Index (DX) Futures Technical Analysis – Strong Over 93.52, Weak Under 93.34

December U.S. Dollar Index futures were up on Tuesday as investors reacted to the possibility that President Trump could select a more hawkish Federal Reserve chief than current Chair Janet Yellen. With the chances of a rate hike in December sitting at about 90 percent, investors may start to shift their focus on the next Fed chair.

The dollar was underpinned after Stanford University economist John Taylor emerged as a major candidate. Taylor, a proponent of a rule-based monetary policy, believes rates should be much higher than the current target of 1.0 – 1.25 percent. Rates could rise faster if Taylor is appointed and this would be bullish for the U.S. Dollar.

Daily Technical Analysis

The main trend is up according to the daily swing chart. After five day set-up, momentum has shifted back to the upside. A trade through 94.10 will signal a resumption of the uptrend. A move through 92.59 will change the main trend to down.

The short-term range is 94.10 to 92.59. Its retracement zone at 93.34 to 93.52 was tested on Tuesday. This zone is very important to the structure of the market. Aggressive counter-trend sellers are trying to stop the rally in an effort to form a secondary lower top. Trend traders will try to drive the dollar through the retracement zone in an effort to make 92.59 an important main bottom.

It’s going to be difficult to break the dollar hard because of the series of retracement levels at 92.90, 92.66, 92.45, 92.32 and 92.06. Each are potential support levels.

The near-term direction of the index will be determined by trader reaction to 93.34 to 93.52.

A sustained move over 93.52 will signal the presence of buyers. This could generate enough upside momentum to challenge the major 50% level at 94.05 and the last main top at 94.10.

A sustained move under 93.34 will indicate the presence of sellers. This could lead to a labored break.

Look for a bullish tone on a sustained move over 93.52 and a bearish tone on a sustained move under 93.34.