U.S. Dollar Index (DX) Futures Technical Analysis – Big GDP Miss Could Trigger Steep Break into 108.00

The U.S. Dollar is edging higher against a basket of major currencies on Thursday as traders position-themselves ahead of three key U.S. economic reports, due to be released later in the session. Traders will be eyeing reports on Advance GDP, Durable Goods and Weekly Initial Claims to determine whether the Federal Reserve will slow the pace of its rate hiking cycle.

At 03:09 GMT, December U.S. Dollar Index futures are trading 109.710, up 0.158 or +0.14%. On Wednesday, the Invesco DB US Dollar Index Bullish Fund ETF (UUP) settled at $29.49, down $0.32 or -1.07%.

ECB Rate Hike in Spotlight

On Wednesday, the heavily weighted Euro rose 1.14% to 1.0084, its highest level since September 13, boosted by a less-hawkish interest rate outlook by the Federal Reserve at next Wednesday’s policy meeting and a widely expected 75-basis point rate hike at today’s European Central Bank (ECB) monetary policy meeting.

With the 75-basis point rate hike priced in, the focus for traders will be on any comments about its December interest rate decision.

Sterling Extends Gains

The British Pound strengthened on Wednesday, hitting its highest level since September 13, as traders continued to react positively to Rishi Sunak becoming Britain’s prime minister.

Loonie Strengthens Despite BOC Smaller-than-Expected Rate Hike

Elsewhere, the Bank Canada hiked interest rates by a smaller-than-expected 50 basis points and said future increases would be influenced by its assessment of how tighter policy was working to slow demand and ease inflation.

Greenback Traders Bracing for US Advance GDP Data

In the U.S. on Thursday, traders will get the opportunity to react to U.S. reports on Advance GDP, Durable Goods and Weekly Unemployment Claims.

The US Dollar could weaken against a basket of major currencies on Thursday if the Advance GDP comes in weaker than the 2.3% forecast. This would likely solidify views that the Federal Reserve will slow the pace of its rate hiking cycle starting at its December meeting.

Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart. The trend was reaffirmed on Wednesday when buyers took out the last swing bottom at 109.965. A move through 113.835 and 113.850 will change the trend to up.

The short-term range is 107.45 to 114.745. The index is trading on the weak side of its retracement zone at 110.237 to 111.098, making it resistance.

The main range is 104.150 to 114.745. Its retracement zone at 109.448 to 108.197 is the next downside target.

Daily Swing Chart Technical Forecast

Trader reaction to the main 50% level at 109.448 is likely to determine the direction of the December U.S. Dollar Index on Thursday.

Bullish Scenario

A sustained move over 109.448 will indicate the presence of counter-trend buyers. If this creates enough upside momentum then look for a surge into the short-term Fibonacci level at 110.237. Sellers could come in on the first test of this level, but overcoming it could trigger a quick move into the short-term 50% level at 111.098.

Bearish Scenario

A sustained move under 109.448 will signal the presence of sellers. This could trigger an acceleration to the downside with 108.197 to 107.450 the next major target zone.