U.S. Dollar Index (DX) Futures Technical Analysis – Traders Await Powell’s Comments on State of Economy

On Tuesday, the U.S. Dollar is inching lower against a basket of major currencies as investors awaited testimony by Federal Reserve Chair Jerome Powell and labor market data due later this week for further indications on how much higher the U.S. central bank is likely to raise interest rates.

At 07:11 GMT, March U.S. Dollar Index futures are trading at 104.240, down 0.085 or -0.08%. On Monday, the Invesco DB US Dollar Index Bullish Fund ETF (UUP) settled at $28.26, down $0.05 or -0.18%.

Fed Chair Powell’s Testimony on Tap

Fed Chair Powell’s testimony before Congress on Tuesday and Wednesday and Friday’s jobs data is expected to be the crucial events that validate the economic data delivered last month concerning the January figures.

Powell’s testimony will be watched for any new signals on whether the U.S. central bank could reaccelerate rate hikes in response to the recent data. After delivering jumbo hikes last year, the Fed has raised interest rates by 25 basis points each at its previous two meetings.

Fed funds futures traders are pricing in a 76% probability that the Fed will raise rates by 25 basis points at its March 21-22 meeting and a 24% likelihood of a 50 basis points increase.

Analysts also note, however, that the Fed may be reluctant to increase the rate hikes again as it would likely spook investors by indicating that the bank made a mistake in switching to 25 basis point increases.

Daily March US Dollar Technical Analysis

The Main Trend is down according to the daily swing chart. However, momentum is trending lower.

A trade through 104.045 will change the Main Trend to down. A move through 105.320 will signal a resumption of the uptrend.

The nearest resistance is a pair of pivots at 104.503 and 104.683. The closest support is a long-term Fibonacci level at 103.664.

Daily March US Dollar Technical Forecast

The direction of the March U.S. Dollar on Tuesday is likely to be determined by trader reaction to the pivots at 104.503 and 104.683.

Look for the counter-trend selling to continue on a sustained move under 104.503, with 104.664 as the primary objective. Sustained activity over 104.683 could create the upside momentum needed to challenge the two main tops at 105.155 and 105.320.