U.S. Dollar Index (DX) Futures Technical Analysis – Greenback Approaching 7-Month Low at 102.702

The U.S. Dollar is edging lower against a basket of major currencies on Monday, hovering near a seven-week low after Fed Funds Futures traders priced in a 73% chance of a 25 basis point rate hike by the Federal Reserve on Feb. 1. Meanwhile, news that China was reopening its borders is boosting riskier currencies, dampening demand for the safe-haven greenback.

At 13:47 GMT, March U.S. Dollar Index futures are trading 103.190, down 0.456 or -0.44%. On Friday, the Invesco DB US Dollar Index Bullish Fund ETF (UUP) settled at $27.92, down $0.35 or -1.24%.

Looking Ahead…

This week’s U.S. consumer price index report (CPI), due to be released on Thursday, should set the tone in the market until the Federal Reserve makes its interest rate decision on Feb. 1. The big reveal will be where the Fed sees its terminal rate, or final rate hike level.

The Fed is leaning toward the 5.00% – 5.50% level, while the market is pricing in a level under 5.00%.

Additionally, the headline number is expected to fall sharply, but the core number is what everyone will be watching.

Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart. The trade through the last swing bottom at 103.145 earlier today changed the main trend to down. A move through 105.500 will change the main trend to up.

The market is also trading on the weak side of a long-term Fibonacci level at 103.664, making it resistance.

Daily Swing Chart Technical Forecast

Trader reaction to the Fibonacci level at 103.664 is likely to determine the direction of the March U.S. Dollar Index on Monday.

Bearish Scenario

A sustained move under 103.664 will indicate the presence of sellers. A sustained move under the former main bottom at 103.145 will indicate the selling pressure is getting stronger. This could lead to a test of the next main bottom at 102.875.

Taking out 102.875 will reaffirm the downtrend with the June 16 main bottom at 102.702 the next major target. This is a potential trigger point for an acceleration to the downside with the May 24 main bottom at 101.000 the next major target.

Bullish Scenario

A sustained move over 103.664 will signal the presence of buyers. This could trigger a short-covering rally but not necessarily a change in trend.