US Dollar Index Reaction to 96.025 – 95.690 Sets the Tone

The U.S. Dollar is edging higher against a basket of major currencies on Thursday, pausing this week’s slide as traders awaited central bank meetings in Britain and Europe.

Policy decisions from the Bank of England (BOE) and European Central Bank (ECB) are due at 12:00 GMT and 12:45 GMT respectively, and a news conference with ECB President Christine Lagarde is scheduled at 13:30 GMT.

At 11:55 GMT, March U.S. Dollar Index futures are trading 96.215, up 0.280 or +0.29%. On Wednesday, the Invesco DB US Dollar Index Bullish Fund ETF (UUP) settled at $25.71, down $0.09 or -0.35%.

Traders have fully priced in a 25 basis point hike from the BOE, so the focus will likely fall on the outlook. While the ECB is not expected to offer up policy changes, hot consumer prices and recent strong labor data has raised expectations for a shift away from describing inflation as transitory.

Dollar traders should expect heightened volatility especially if the BOE and ECB decisions are interpreted as hawkish.

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart. A trade through 97.440 will signal a resumption of the uptrend. A move through 94.610 will change the main trend to down.

The short-term range is 94.610 to 97.440. Its retracement zone at 96.025 to 95.690 is support. This zone stopped the selling on Wednesday at 95.795.

The main retracement zone support is 95.320 to 94.820. This area is controlling the near-term direction of the market.

The minor range is 97.440 to 95.795. Its retracement zone at 96.620 to 96.810 is the primary upside target.

Daily Swing Chart Technical Forecast

The direction of the March U.S. Dollar Index on Thursday is likely to be determined by trader reaction to 96.025.

Bullish Scenario

A sustained move over 96.025 will indicate the presence of buyers. If this move is able to generate enough upside momentum then look for a surge into the minor retracement zone at 96.620 to 96.810.

Bearish Scenario

A sustained move under 96.025 will signal the presence of sellers. This could trigger a break into 95.690.

A failure to hold 95.690 will indicate the selling pressure is getting stronger. This could trigger an acceleration into the main retracement zone at 95.320 to 94.820.