U.S. Dollar Index (DX) Futures Technical Analysis – Rally Pauses Ahead of Fed Speakers, Meeting Minutes

The U.S. Dollar is edging lower against a basket of major currencies on Tuesday, following an overnight dip in U.S. Treasury yields. The move is taking place as investors looked to Federal Reserve speaker comments for hints about future interest rate policy and the central bank’s view on the state of the U.S. economy.

At 11:11 GMT, December U.S. Dollar Index futures are trading 107.270, down 0.462 or -0.43%. On Monday, the Invesco DB US Dollar Index Bullish Fund ETF (UUP).

Greenback Traders Looking for Clarity from the Federal Reserve

Fed officials speaking the last several days have been emphasizing that interest rates will continue to rise. However, the key issues for traders is by how much and for how long.

On Monday, Cleveland Fed President Loretta Mester told CNBC’s Closing Bell” that the pace of rate hikes could be slowed, but inflation figures were not yet convincing enough to stop the hikes entirely. She also favored a series of smaller rate hikes.

Speaking at the Southern Economic Association over the weekend, Atlanta Fed President Raphael Bostic said rates would likely have to go higher still, but he was prepared to “move away” from implementing 75 basis point rate hikes in favor of smaller one.

Further Fed speakers are due to make remarks on Tuesday, before minutes from the central bank’s last meeting will be published on Wednesday at 19:00 GMT.

Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart. A trade through 105.155 will signal a resumption of the downtrend. A move through 110.890 will change the main trend to up.

On the upside, resistance is a pair of Fibonacci levels at 107.780 and 108.197. This area stopped the rally on Monday.

The minor range is 105.155 to 107.895. Its pivot at 106.525 is the nearest support.

Daily Swing Chart Technical Forecast

Trader reaction to the long-term Fibonacci level at 107.780 is likely to determine the direction of the December U.S. Dollar Index on Tuesday.

Bearish Scenario

A sustained move under 107.780 will indicate the presence of sellers. If this creates enough downside momentum then look for the selling to possibly extend into the minor pivot at 106.525. Aggressive counter-trend buyers could return on a test of this level.

Bullish Scenario

A sustained move over 107.780 will signal the presence of buyers. This could trigger a surge into 108.197.

Look for sellers on the first test of 108.197 since the main trend is down. Overtaking it, however, could trigger an acceleration to the upside.