U.S. Dollar Index (DX) Futures Technical Analysis – Reaction to Long-Term Fib Level at 107.780 Sets the Tone

The U.S. Dollar is trading at its highest level against a basket of major currencies since July 18 after U.S. Treasury yields hit a one-month high. U.S. Treasury yields are moving up on Friday as investors digested the previous day’s data release, which showed jobless claims edging lower, below expectations.

The dollar is also being supported by a weaker Euro and British Pound. The common currency and the sterling fell to one-month lows versus the greenback with investors worrying about further economic slowdown after Federal Reserve officials reiterated the need for higher rates.

At 11:17 GMT, September U.S. Dollar Index futures are trading 107.815, up 0.400 or +0.37%. On Thursday, the Invesco DB US Dollar Index Bullish Fund ETF (UUP) settled at $28.76, up $0.23 or +0.79%.

Improving Jobless Claims Gives Fed Room to Raise Rates

In economic news released on Thursday, jobless claims came in at 250,000 for the week ending August 13, down 2000 from the prior week and below the Dow Jones estimate of 260,000.

Markets and monetary policy officials are watching the job market closely, as rate increases aim to cool a labor market and 40-year high inflation. Fed policymakers said that lowering inflation is top priority, even if it means a decrease in hiring, according to the minutes released Wednesday.

Other catalysts driving the price action are remarks from a pair of Fed officials, who on Thursday, reiterated the need for further rate hikes, and as investors reevaluated Wednesday’s minutes from the U.S. central bank’s July meeting as being more hawkish than originally thought.

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart. The trade turned up on Thursday when buyers took out the swing top at 106.810. A move through 104.515 will change the main trend to down.

The minor trend is also up. A trade through 106.108 will change the minor trend to down. This will shift momentum to the downside.

On the upside, the nearest resistance is a long-term Fibonacci level at 107.780. On the downside, the support is a short-term 50% level at 106.828.

Daily Swing Chart Technical Forecast

Trader reaction to the long-term Fibonacci level at 107.780 is likely to determine the direction of the September U.S. Dollar index on Friday.

Bullish Scenario

A sustained move over 107.780 will indicate the buying is getting stronger. This is a potential trigger point for an acceleration to the upside with the next major target the July 14 main top at 109.140.

Bearish Scenario

A sustained move under 107.780 will signal the presence of sellers. If this creates enough downside momentum then look for an intraday break into the 50% level at 106.828.