US Dollar Index: Trend Up, but Momentum Moving Lower

The U.S. Dollar is inching lower against a basket of major currencies on Thursday after giving up earlier gains. The price action suggests the market is still in the control of sellers who helped form a potentially bearish closing price reversal top the previous session.

Helping to support the dollar are firm U.S. Treasury yields and a weaker Japanese Yen. But keeping a lid on the index is a slightly higher Euro, British Pound and Canadian Dollar.

At 06:28 GMT, June U.S. Dollar Index futures are trading 100.360, down 0.057 or -0.06%. On Thursday, the Invesco DB US Dollar Index Bullish Fund ETF (UUP) settled at $26.81, down $0.19 or -0.70%.

Nervousness Due to G7 Worries

Fundamentally, the U.S. Dollar is still strong, but it may be ripe for a near-term correction as some investors question valuation. Of particular concern are fears about what the G7 might say about its rapid ride especially versus the Japanese Yen.

Japan explained to its G7 counterparts the yen’s recent ‘somewhat rapid’ declines, finance minister Shunichi Suzuki said on Thursday, underscoring Tokyo’s growing alarm over the currency’s sharp fall to a two-decade low against the dollar, Reuters reported.

Suzuki did not comment on how the G7 finance leaders responded, saying only that the meeting in Washington, D.C., focused on discussions over the global economy and Russia’s invasion of Ukraine rather than exchange-rate moves.

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart, but Wednesday’s closing price reversal top suggests momentum may be getting ready to shift to the downside.

A trade through 100.215 will confirm the potentially bearish chart pattern and shift momentum to the downside. A trade through 101.045 will negate the chart pattern and signal a resumption of the uptrend.

The minor trend is also up. A trade through 99.555 will change the minor trend to down. This will confirm the shift in momentum.

The minor range is 99.555 to 101.045. Its 50% level at 100.300 is support.

The second minor range is 97.730 to 101.045. Its 50% level at 99.388 is the second target.

The major support is the long-term Fibonacci level at 98.200.

Daily Swing Chart Technical Forecast

The direction of the June U.S. Dollar Index on Thursday is likely to be determined by trader reaction to 100.300.

Bearish Scenario

A sustained move under 100.300 will indicate the presence of sellers. The first target is 100.215. Taking out this level will confirm the closing price reversal top. This could trigger an acceleration to the downside with 99.555 – 99.388 the next likely target.

Bullish Scenario

A sustained move over 100.300 will signal the presence of buyers. If this creates enough upside momentum then look for a surge into 101.045. Taking out this level could trigger an acceleration to the upside.

Side Notes

The confirmation of the closing price reversal top won’t change the main trend to down, but it could trigger the start of a minimum 2 to 3 day correction.