US Dollar Index Facing Resistance at 95.755 – 96.020
The U.S. Dollar is trading lower against a basket of major currencies on Friday after putting in a mixed performance earlier in the session. Nonetheless, the greenback is poised to post its best weekly performance in a month, as the world’s reserve currency held its ground amid a sell-off of riskier assets across markets.
At 12:13 GMT, March U.S. Dollar Index futures are trading 95.685, down 0.40 or -0.04%. On Thursday, the Invesco DB US Dollar Index Bullish Fund ETF (UUP) settled at $25.68, up $0.08 or +0.31%.
Investor sentiment has soured in recent days due to weaker economic data, rampant inflation and concerns over the pace of U.S. Federal Reserve policy tightening.
With risk currencies like the Australian and New Zealand Dollars moving lower and safe-haven currencies like the Swiss Franc and Japanese Yen edging higher, the U.S. Dollar is likely being underpinned by flight-to-safety buyers.
Treasury yields are also falling, which is further indicative of safe-haven buying. Most of the time the dollar tracks yields, but when investors are looking for protection from risk, you can throw out the usual correlations.
Daily Swing Chart Technical Analysis
The main trend is down according to the daily swing chart, however, momentum has been trending higher since the formation of the closing price reversal bottom on January 14.
A trade through 96.475 will change the main trend to up. A move through 94.610 will negate the closing price reversal bottom and signal a resumption of the downtrend.
The minor trend is also down. A trade through 95.405 will reaffirm this trend.
The main range is 93.200 to 96.895. Its retracement zone at 95.050 to 94.610 is support. This area stopped the selling at 94.610 on January 14.
The short-term range is 96.895 to 94.610. The index is currently testing its retracement zone at 95.755 to 96.020. This area is resistance.
The direction of the March U.S. Dollar Index on Friday is likely to be determined by trader reaction to 95.755.
A sustained move under 95.755 will indicate the presence of sellers. The first downside target is the minor bottom at 95.405.
Taking out 95.405 could trigger a further break into the main retracement zone at 95.050 to 94.610.
A sustained move over 95.755 will signal the presence of buyers. Taking out 95.850 could trigger a surge into 96.020.
Overtaking the short-term Fibonacci level at 96.020 could trigger an acceleration to the upside with 96.475 the next major target.
Essentially, bullish counter-trend buyers are trying to form a secondary higher bottom at 95.050 to 94.610. Bearish trend traders are trying to form another secondary lower top at 95.755 to 96.020.