US Markets

U.S. Dollar Index Futures (DX) Technical Analysis – Trying to Post Closing Price Reversal Bottom

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The U.S. Dollar is trading lower against a basket of currencies on Wednesday on rising expectations of a sooner-than-expected Fed interest rate cut. Fed Chair Jerome Powell fueled the selling pressure on Tuesday when he deviated from his recent calls for “patience” and told investors the Fed would respond “as appropriate” to trade pressure.

At 14:20 GMT, June U.S. Dollar Index futures are trading 96.865, down 0.134 or -0.14%.

Most of the pressure on the dollar is coming from a stronger Euro. Position-adjusting in reaction to a possible rate cut by the Fed as early as its June meeting is helping to underpin the single-currency. Gains, however, are being limited by position-squaring ahead of Thursday’s European Central Bank meeting. Speculators are betting the ECB and President Draghi will present a dovish front in its monetary policy statement.

Expectations of lower interest rates are also driving the British Pound and Canadian Dollars higher against the U.S. Dollar. The safe-haven Swiss Franc and Japanese Yen are trading mixed due to uncertainty over a conflicting economic outlook.

Daily June U.S. Dollar Index

Daily Technical Analysis

The main trend is down according to the daily swing chart. The swing chart turned down earlier in the session when sellers took out the main bottom at 96.810. The main trend will change to up on a trade through 98.26, but this is highly unlikely. However, the index is down nine sessions from its last top, which puts it in the window of time for a closing price reversal bottom.

The main range is 95.170 to 98.260. Its retracement zone at 96.715 to 96.350 is the primary downside target. This zone is currently being tested. It’s also controlling the longer-term direction of the index. Buyers came in earlier today when the index hit a low of 96.655 inside this zone.

Daily Technical Forecast

The index is currently mounting a strong comeback after testing the retracement zone support. It’s being helped by an intraday sell-off in the Euro.

Since the June U.S. Dollar Index is in the window of time for a closing price reversal bottom, the direction of the index the rest of the session will likely be determined by trader reaction to Tuesday’s close at 97.00.

Bearish Scenario

A sustained move under 97.00 will indicate the presence of sellers. The first downside target is the longer-term uptrending Gann angle at 96.86. If this fails then look for a retest of the major 50% level at 96.715 and today’s intraday low at 96.655.

Taking out 96.655 could trigger an acceleration to the downside with the main Fibonacci level at 96.350 the next downside target.

Bullish Scenario

A sustained move over 97.00 will signal the presence of buyers. This could trigger a rally into a downtrending Gann angle at 97.135. This angle has been guiding the market lower since May 23.

Taking out 97.135 could trigger an acceleration to the upside with the next target angle coming in at 97.70.

This article was originally posted on FX Empire

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