US Dollar Index (DX) Futures Technical Analysis – Upside Breakout Could Test 90.76 to 91.08

The U.S. Dollar closed higher against a basket of currencies last week, boosted by rising U.S. Treasury yields and hawkish U.S. Federal Reserve minutes.

March U.S. Dollar Index futures settled the week at 89.808, up 0.795 or +0.89%.

The index also posted an inside move which often indicates investor indecision and impending volatility. Looking at the price action since the week-ending January 26, the market appears to be forming a support base. Keep an eye on this chart pattern because “the size of the rally is often related to the length of the base”.

Weekly Technical Analysis

The main trend is down according to the weekly swing chart. A trade through 88.15 will signal a resumption of the downtrend. This should lead to a test of the December 16, 2014 main bottom at 88.067. Prices could accelerate to the downside if this level is taken out with rising volume.

The main range is 93.825 to 88.150. Its retracement zone at 90.99 to 91.66 is the primary downside target. Since the main trend is down, sellers could come in on the first test of this zone.

Weekly Technical Forecast

Based on last week’s close at 89.808 and the price action, the direction of the index this week is likely to be determined by trader reaction to 90.170 to 89.865. This is last week’s inside move.

A sustained move over 90.170 will indicate the presence of buyers. This could trigger a rally into a downtrending Gann angle at 90.76, a 50% level at 91.00 and a downtrending Gann angle at 91.08. Since the main trend is down, sellers could come in on a test of any one of these levels.

Overtaking 91.08 could trigger an acceleration into the Fibonacci level at 91.67. This is another potential trigger point for an acceleration to the upside.

A sustained move under 89.865 will signal the presence of sellers. This could drive prices into a downtrending Gann angle at 88.33.

Crossing to the weak side of the downtrending Gann angle at 88.33 will indicate the selling is getting stronger. This could lead to a test of 88.150 then 88.067.