US Dollar Index Strength Puts 100.560 – 100.930 on Radar

The U.S. Dollar is trading higher against a basket of major currencies early Tuesday, as Treasury yields spiked to a three year high ahead of U.S. inflation data which could foreshadow even more aggressive interest rate hikes from the Federal Reserve.

At 03:44 GMT, June U.S. Dollar Index futures are trading 100.040, up 0.116 or +0.12%. On Monday, the Invesco DB US Dollar Index Bullish Fund ETF (UUP) settled at $26.72, up $0.05 or +0.19%.

The dollar is hovering just below the two-year high against a basket of currencies reached on Friday. Its strength is being fueled by higher U.S. Treasury yields, which have soared on expectations of more aggressive tightening by the Federal Reserve.

The volatile Euro is being underpinned after French leader Emmanuel Macron beat far-right challenger Marine Le Pen in the first round of presidential voting. However, gains are being capped because the French presidential election runoff on April 24 promises to be a tightly fought contest.

The dollar also continued to gain against the Japanese Yen as the Bank of Japan (BOJ) remains more dovish than increasingly hawkish peers to the Federal Reserve.

Looking ahead to Tuesday, all eyes will be on the U.S. Consumer Price Index (CPI) report, due to be released at 12:30 GMT. Economists polled by Reuters forecast the US. CPI would post an 8.4% year-over-year increase in March.

NatWest Markets economists have forecast a 1.1% month-on-month jump in the headline inflation figure which would be the largest monthly gain since June 2008.

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart, however, momentum is threatening to shift to the downside following the confirmation of Friday’s closing price reversal top.

A trade through 100.200 will negate the chart pattern and signal a resumption of the uptrend. The main trend will change to down on a move through 97.730.

The minor trend is also up. A trade through 99.610 will change the minor trend to down. This will confirm the shift in momentum.

The new minor range is 100.200 to 99.610. The index is currently trading on the strong side of its pivot at 99.905.

The second minor range is 97.730 to 100.200. If the minor trend changes to down then its pivot at 98.965 will become the next downside target.

Daily Swing Chart Technical Forecast

The direction of the June U.S. Dollar Index on Tuesday is likely to be determined by trader reaction to the pivot at 99.905.

Bullish Scenario

A sustained move over 99.905 will indicate the presence of buyers. If this move creates enough upside momentum then look for a re-test of 100.200. Taking out this level will indicate the buying is getting stronger. This will put the index on a path to challenge the resistance cluster at 100.560 to 100.930.

Bearish Scenario

A sustained move under 99.905 will signal the presence of sellers. If this move generates enough downside momentum then look for the selling to possible extend into the minor bottom at 99.610.

Taking out 99.610 will indicate the selling is getting stronger. This could trigger an acceleration into the next pivot at 98.965.