U.S. Dollar Index (DX) Futures Technical Analysis – Overtaking 97.470 Could Trigger Surge into 97.920

The U.S. Dollar is trading flat early Thursday as trend traders seem poised to resume the downtrend amid rising expectations that the Federal Reserve would ease rates further to cushion the U.S. economy from the ripple effects of the spreading coronavirus outbreak. The Fed took aggressive action on Tuesday, delivering a 50-basis point emergency rate cut, with many traders expecting at least two more such moves in coming months.

At 06:14 GMT, March U.S. Dollar Index futures are trading at 97.330, up 0.023 or +0.02%.

The Fed made its move after the dollar had fallen for eight sessions and after Treasury futures had predicted a 50-basis point cut. The inability to rally now that rates have been cut suggests that investors may be pricing in additional cuts and this could be bearish for the U.S. Dollar against a basket of major currencies.

Fed funds futures for June 2020 on Friday implied traders are pricing in an 84% chance of at least a 25 basis point cut at that month’s meeting.

Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart. A trade through 96.875 will signal a resumption of the downtrend, while a move through the main bottom at 96.815 will reaffirm the downtrend.

The main trend will change to up on a trade through 99.815. This is highly unlikely, but due to the prolonged move down in terms of price and time, we could see a dramatic counter-trend reversal to the upside. The move won’t change the main trend to up, but it will alleviate some of the downside pressure while setting up the next shorting opportunity.

The main range is 96.020 to 99.815. Its retracement zone at 97.470 to 97.920 is potential resistance and a launching point for an acceleration to the upside.

The short-term range is 99.815 to 96.875. Its retracement zone at 98.345 to 98.690 is a potential upside target.

Daily Swing Chart Technical Forecast

Based on the early price action and the current price at 97.330, the direction of the March U.S. Dollar Index the rest of the session on Thursday is likely to be determined by trader reaction to the main Fibonacci level at 97.470.

Bearish Scenario

A sustained move under 97.470 will indicate the presence of sellers. If this move creates enough downside momentum then look for the selling to possibly extend into 96.875 and 96.815. The latter is a potential trigger point for an acceleration to the downside with the December 31, 2019 main bottom at 96.020 the next potential downside target.

Bullish Scenario

A sustained move over 97.470 will signal the presence of buyers. This could trigger a surge into 97.920. Crossing to the strong side of this level could trigger an acceleration into the short-term 50% level at 98.345.