US Dollar Index Momentum Building for Breakout Over 96.565

The U.S. Dollar is trading higher against a basket of major currencies on Monday on safe-haven buying. How do we know this is safe-haven buying? Treasury yields are falling and the dollar is rising. Furthermore, the Japanese Yen is rising against the U.S. Dollar. Stocks are also trading lower. Those are usually pretty good indications that investors are looking for protection.

At 11:09 GMT, March U.S. Dollar Index futures are trading 96.245, up 0.172 or +0.18%. On Friday, the Invesco DB US Dollar Index Bullish Fund ETF (UUP) settled at $25.73, up $0.12 or +0.45%.

One can also build a case for a 50-basis point rate hike by the Fed in March for contributing to the rally, but the financial markets seem to be mostly on edge about the prospect of war in Europe. The United States said on Sunday that Russia could invade Ukraine at any time and might create a surprise pretext for an attack, Reuters reported.

Today could turn into quite a volatile trading session with European Central Bank President Christine Lagarde addressing the European Parliament and the extremely hawkish St. Louis Fed President James Bullard appearing on CNBC.

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart. A trade through 95.145 will change the main trend to down. A move though 97.440 will reaffirm the uptrend.

The minor trend is also up. A trade through 95.160 will change the minor trend to down and shift momentum lower.

The short-term range is 97.440 to 95.145. The index is currently testing its retracement zone at 96.295 – 96.565.

The major support is the retracement zone at 95.320 to 94.820. This zone stopped the selling at 95.145 on February 4 and at 95.160 on February 10.

Daily Swing Chart Technical Forecast

The near-term direction of the March U.S. Dollar Index will be determined by trader reaction to 96.295 to 96.565.

This zone is importance because aggressive counter-trend sellers are going to try to form a potentially bearish secondary lower top, while aggressive trend-traders are going to try to trigger a breakout over 96.565.

Bullish Scenario

A sustained move over 96.565 will indicate the buying is getting stronger. This could trigger a near-term acceleration into the main top at 97.440.

Bearish Scenario

A sustained move under 96.295 will signal the presence of sellers. The first downside target is a minor pivot at 97.74, followed by 95.320 – 94.820. Inside this zone are a pair of bottoms at 95.160 and 95.145.