US Dollar Index (DX) Futures Technical Analysis – Weekly Upside Momentum Could Take Index into 94.05 to 94.82

December U.S. Dollar Index futures finished higher last week, recovering from a set-back the week before. The higher close has put the market in a position to challenge the recent minor top at 94.10.

Supporting the dollar last week against a basket of currencies were higher U.S. Treasury yields. They firmed on rising expectations of a Fed rate hike in December. Late in the week, the index was underpinned by the news that the Senate approved a budget blueprint for the 2018 fiscal year, clearing a critical hurdle for Republicans to pursue a tax-cut package without Democratic support.

The new focus for investors this week will be on President Trump’s appointment of a Fed Chair. Speculators are saying he has narrowed his choices down to three candidates, including current Fed Chair Janet Yellen. The dollar should rally if Trump appoints Yellen or another hawkish candidate. The dollar should weaken if Trump selects a dovish candidate.

Weekly Technical Analysis

The main trend is up according to the weekly swing chart. It turned up about two weeks ago when the market crossed the previous main top at 93.84, however, there has not been much of a follow-through rally. This will occur when strong buying volume comes in to support the rally.

The short-term range is 97.30 to 90.795. Its retracement zone at 94.05 to 94.82 remains the primary upside target. We could see the start of a strong rally if buyers can clear this retracement zone and resistance area.

The main range is 103.275 to 90.795. If the index gains momentum over 94.82 then look for the move to extend into the main retracement zone at 97.04 to 98.51.

Weekly Forecast

On the downside, traders will be watching the reaction at 92.80 to 92.55. This area must hold as support to maintain the developing upside bias.

If 92.55 fails as support then look for the index to weaken into a support cluster at 91.67 to 91.61. This zone is the last potential support area before the 90.795 main bottom.

Holding above 92.80 will indicate the presence of buyers. If upside momentum begins to build then look for a possible rally into 94.05 to 94.10. The latter is the trigger point for a move into 94.82 and 95.05.

Watch for volatility on October 26 when the European Central Bank releases its latest monetary policy decision.