U.S. Dollar Index (DX) Futures Technical Analysis – Due for Reversal Bottom; Could Stengthen Over 93.580

The U.S. Dollar is inching lower early Thursday in a low volume, tight-trading range session. Helping to cap gains and pressure prices this week is improving risk sentiment, which zapped the greenback of recent upside momentum built from expectations the Federal Reserve would tighten monetary policy.

At 04:10 GMT, December U.S. Dollar Index futures are trading 93.500, down 0.035 or -0.04%.

Traders have fully-priced the start of a Fed tapering in November and have moved up the date of the first Fed rate hike to July 2022, but apparently that isn’t fast enough, causing investors to increase bets on more aggressive action by other major central banks.

That includes the Bank of England (BoE). The British Pound is rising against the U.S. Dollar on firming perceptions the BoE will raise interest rates as soon as next month to curb inflation, despite softer-than-expected U.K. price data on Wednesday.

The consensus shows that traders are betting on a November BoE rate hike and another perhaps in December. The BoE wants to be aggressive as inflation could get out of control given a severe labor shortage.

Essentially, we are likely to see rate hikes in several countries to curb inflation before the Fed makes it move, which is weighing on the investment appeal of the U.S. Dollar.

Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart. The trend turned down on Tuesday when sellers took out the swing bottom at 93.680.

A move through 94.570 will change the main trend to up. This is highly unlikely but today marks the seventh day down from the last main top, which puts the index inside the window of time for a potentially bullish closing price reversal bottom.

The minor trend is also down. A trade through 94.175 will change the minor trend to up. This will shift momentum to the upside.

The short-term range is 92.970 to 94.570. The index is currently trading on the weak side of its retracement zone at 93.580 to 93.770, making the area potential resistance.

On the downside, potential support is a series of retracement levels at 93.430, 93.255, 93.160 and 92.940.

Daily Swing Chart Technical Forecast

The direction of the December U.S. Dollar Index on Thursday is likely to be determined by trader reaction to the short-term Fibonacci level at 93.580.

Bearish Scenario

A sustained move under 93.580 will indicate the presence of sellers. The first downside target is a 50% level at 93.430.

Taking out 93.430 will indicate the selling pressure is getting stronger. This could trigger an acceleration into the loose support cluster at 93.255 to 93.160.

Bearish Scenario

A sustained move over 93.580 will signal the presence of buyers. If this creates enough upside momentum then look for a move into 93.770. Overcoming this level could drive the index into 94.175 over the near-term.

Side Notes

The dollar index is down seven sessions from its last main top. A close over 93.535 will form a closing price reversal bottom. This won’t change the main trend to up, but if confirmed, it could trigger the start of a 2 to 3 day counter-trend rally.

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