US Dollar Index Weakens Despite Monday’s Trend Change

The U.S. Dollar Index is inching lower on Tuesday, capped by a rise in the Euro and a slight improvement in the Japanese Yen.

The single currency is edging higher in cautious trading as Ukrainian and Russian negotiators prepared to meet in Turkey for the first direct talks in more than two weeks.

Meanwhile, Japanese Yen bears are taking a breather after the currency crashed to its lowest level since August 2015 on Monday. The Yen on Tuesday kept up its relentless quest to defend a key yield cap by offering to buy unlimited amounts of 10-year government bonds, putting even more downward pressure on the Yen.

At 09:09 GMT, the June U.S. Dollar Index is trading 99.025, down $0.030 or -0.03%. On Tuesday, the Invesco DB US Dollar Index Bullish Fund ETF (UUP) settled at $26.49, up $0.08 or +0.30%.

U.S. Dollar Index traders are also monitoring the action in the U.S. Treasury market after the 5-year and 30-year rates inverted on Monday morning for the first time since 2006, with more purchases of the longer-dated Treasurys than the shorter-dated government bonds.

U.S. 5-year and 30-year Treasury yields remained inverted on Tuesday morning, ahead of key employment data releases.

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart. The main trend turned up on Monday when buyers took out the previous main top at 99.300. The next main top target is 99.470. A trade through 97.715 will change the main trend to down.

The minor trend is also up. A trade through 98.420 will change the minor trend to down. This will shift momentum to the downside.

The minor range is 99.470 to 97.715. Its 50% level at 98.590 is support. The long-term support is the major Fibonacci level at 98.200.

Daily Swing Chart Technical Forecast

Now that the main trend has changed to up, we’d like to continue to see a pattern of higher-highs and higher-lows to drive the uptrend. Based on this assessment, the direction of the June U.S. Dollar Index on Tuesday is likely to be determined by trader reaction to 99.365.

Bullish Scenario

A sustained move over 99.365 will indicate the presence of buyers. If this move creates enough upside momentum then look for a surge into the next main top at 99.470.

Taking out 99.470 will reaffirm the uptrend. Since the next major target is 100.560 to 100.930, Taking out 99.470 could trigger an acceleration to the upside.

Bearish Scenario

The inability to overcome 99.365 will signal the presence of sellers. Taking out Monday’s low at 98.820 will indicate the selling pressure is getting stronger. This could trigger a break into the pivot at 98.590, followed by the minor bottom at 98.420.

Taking out 98.420 will change the minor trend to down. This will shift momentum to the downside with 98.200 the next target.