US Dollar Index Reaction to 95.750 – 96.025 Sets the Tone
The U.S. Dollar is trading steady to better against a basket of major currencies on Monday with traders expressing caution over the escalating tensions in Ukraine and a widely anticipated hawkish lean by the Federal Reserve on Wednesday.
At 10:31 GMT, March U.S. Dollar Index futures are trading 95.750, up 0.114 or +0.12%. On Friday, the Invesco DB US Dollar Index Bullish Fund ETF settled at $25.62, down $0.06 or -0.23%.
Two stories are expected to dominate the financial market news this week and likely determine the direction of the greenback against its major peers. The first is the Fed policy announcements on Wednesday. The second is the Russia/Ukraine conflict, which is essentially a wildcard since we don’t know if or when an invasion will take place.
Most of the Fed’s monetary policy decisions are likely priced in, but they could surprise with even more hawkish announcements. This would be supportive for the dollar. However, direct U.S. involvement in the Ukraine/Russia conflict could trigger a massive flight-to-safety rally in the greenback.
Daily Swing Chart Technical Analysis
The main trend is down according to the daily swing chart. However, momentum has been trending higher since January 14.
A trade through 96.475 will change the main trend to up. A move through 94.610 will signal a resumption of the downtrend.
The minor trend is also down. A trade through 95.850 will change the minor trend to up. This will confirm the shift in momentum.
The short-term range is 96.895 to 94.610. The index is currently testing its retracement zone at 95.755 to 96.020.
The minor range is 94.610 to 95.850. Its 50% level at 95.230 is support.
The main range is 93.200 to 96.895. Its retracement zone at 95.050 to 94.610 is major support. This zone stopped the selling on January 14 at 94.610.
Daily Swing Chart Technical Forecast
The direction of the March U.S. Dollar Index on Monday is likely to be determined by trader reaction to 95.755.
A sustained move over 95.755 will indicate the presence of buyers. Taking out 95.850 will indicate the buying is getting stronger with 96.020 the next target.
A move through 96.025 could trigger an acceleration to the upside with 96.475 the next potential target.
A sustained move under 95.750 will signal the presence of sellers. If this creates enough downside momentum then look for a move into 95.405, followed by 95.230.