US Dollar Index (DX) Futures Technical Analysis – Testing Major 92.93 to 92.43 Retracement Zone

December U.S. Dollar Index futures closed sharply lower on Friday, ending the week at 92.707, down 0.428 or -0.46%. The catalysts behind the selling pressure were concerns over the Fed’s ability to raise interest rates as many as three times in 2018 as previously expected.

The latest Fed minutes released last week indicated that a rate hike in December is widely expected, but there is uncertainty over the number of rate hikes in 2018 because of worries over the pace of inflation. The sell-off in the dollar reflected investor adjustments to Fed Fund futures positions made to reflect two rate hikes in 2018 instead of three.

Daily Swing Chart Analysis

The main trend is down according to the daily swing chart. The trend was down at the start of the week, but it was reaffirmed when sellers took out the November 15 swing bottom at 93.305. The weak close has put the index in a position to challenge the October 13 main bottom at 92.59.

Taking out 92.59 will indicate the selling is getting stronger. The daily chart is wide open to the downside under this level with the September 20 main bottom at 91.215 the next likely target.

The trend will change to up on a move through 94.085. Monday will also be the 13 day down from the main top at 95.07. This puts the index in the window of time for a potentially bullish closing price reversal bottom.

The main range is 90.795 to 95.07. Its retracement zone is 93.93 to 92.43. This zone is controlling the longer-term direction of the market.

Daily Swing Chart Forecast

Based on Friday’s close at 92.707, the direction of the dollar index this week is likely to be determined by trader reaction to the 50% level at 93.93.

A sustained move under 93.93 will indicate the presence of sellers. This could create the downside momentum to take out the main bottom at 92.59 and the Fibonacci level at 92.43. The daily chart is wide open under 92.43 so don’t be surprised by an acceleration to the downside.

A sustained move over 93.93 will signal the presence of buyers. This will be a combination of short-covering, profit-taking and perhaps some aggressive counter-trend buying. However, it is likely to be a new shorting opportunity as long as the market remains under 94.085.