US Dollar’s Long-Term Uptrend Solid as Long as 98.200 Holds

The U.S. Dollar Index recovered after falling on Tuesday as volatile oil prices impacted the Euro and markets grappled with the significance of talks between Russia and Ukraine and indications that COVID lockdowns will crimp economic growth in China.

The two-sided price action by the dollar against a basket of currencies was also fueled by position-squaring ahead of Wednesday’s U.S. Federal Reserve interest rate and monetary policy decisions.

On Tuesday, June U.S. Dollar Index futures settled at 99.025, up 0.001 or 0.00%. The Invesco DB US Dollar Index Bullish Fund ETF (UUP) finished at $26.47, down $0.03 or -0.13%.

Crude oil futures were down sharply after concerns over supply were eased by ongoing Ukraine ceasefire talks and as rising COVID-19 cases in China suggested slower economic growth and less demand for oil.

On Wednesday, the Fed is expected to raise its benchmark interest rate 25-basis points, but traders want to see if policymakers give hints to how quickly it will raise rates again and how many times before the end of the year.

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart. A trade through 99.470 will reaffirm the uptrend. A move through 97.785 will change the main trend to down.

The minor range is 99.470 to 97.785. The index closed on the strong side of its pivot at 98.625, making it support.

The market also closed on the strong side of a major retracement zone at 98.200 to 96.720. This support zone is controlling the longer-term direction of the index.

Short-Term Outlook

The direction of the June U.S. Dollar Index on Wednesday is likely to be determined by trader reaction to the pivot at 98.625.

The longer-term direction is being controlled by the Fibonacci level at 98.200. This is the last potential support level before the 97.785 main bottom.

A sustained move over 98.200 could create the upside momentum needed to retest 99.470. This price is a potential trigger point for an acceleration to the upside with 100.560 – 100.930 the next major target area.

A change in trend to down could trigger a further break into the major 50% level at 96.720. Buyers are likely to return on a test of this level. But if it fails, the dollar rally could be in trouble.