U.S. Dollar Index (DX) Futures Technical Analysis – Daily Chart Price Spike Driven by Safe-Haven Buying

The U.S. Dollar is inching lower against a basket of major currencies early Friday after surging to a fresh two-decade high the previous session. The catalysts behind the greenback’s strength are concerns that tight monetary policies to tame surging inflation will hurt the global economy.

The gloomy outlook is dampening risk sentiment and encouraging investors to seek protection in safe-haven assets like the U.S. Dollar, Treasury Bonds and the Japanese Yen.

At 03:53 GMT, June U.S. Dollar Index futures are trading 104.675, down 0.222 or -0.21%. On Thursday, the Invesco DB US Dollar Index Bullish Fund ETF (UUP) settled at $28.02, up $0.21 or +0.76%.

Economic news also rattled investors. In the U.S. on Thursday, data from the Labor Department showed weekly initial jobless claims rose to their highest level in three months, although the labor market remains a strength of the U.S. economy, while the producer price index showed a sharp deceleration in April to a 0.5% rise from the 1.6% surge the prior month, thanks in part to a sharp drop in energy products.

In the 12 months through April, the PPI increased 11.0% after accelerating 11.5% in March and above an estimated increase of 10.7%.

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart. A trade through 104.955 will signal a resumption of the uptrend. A move through 102.375 will change the main trend to down.

The minor trend is also up. A trade through 103.405 will change the minor trend to down. This will shift momentum to the downside.

The minor range is 102.375 to 104.955. Its 50% level or pivot at 103.665 is potential support.

The short-term range is 99.810 to 104.955. If the main trend changes to down then look for a test of its retracement zone at 102.385 to 101.775.

Daily Swing Chart Technical Forecast

The direction of the June U.S. Dollar Index on Friday is likely to be determined by trader reaction to 104.895.

Bullish Scenario

A sustained move over 104.895 will indicate the presence of buyers. Taking out 104.955 will indicate the buying is getting stronger.

The daily chart indicates there is plenty of room to the upside with the nearest resistance the December 2, 2002 main top at 107.31. We don’t know at this time if there will be an acceleration to the upside or a slow grind into this target price.

Bearish Scenario

A sustained move under 104.895 will signal the presence of sellers. If this move creates enough downside momentum then look for a test of 104.200. If this level fails then look for the selling to possibly extend into the pivot at 103.665, followed by the minor bottom at 103.405.

A trade through 103.405 will shift momentum and could trigger an acceleration to the downside.