U.S. Dollar Index Futures (DX) Technical Analysis – Retracement Zone at 96.700 – 96.220 Controlling Near-Term Direction

The U.S. Dollar fell sharply against a basket of major currencies on Friday as news of an initial U.S.-China trade deal and an election victory for Britain’s Brexit-backing Conservative Party appeared to clear the lack of confidence on the global investment horizon, hurting safe-haven demand for the greenback. After its initial plunge, the dollar mounted a comeback as lingering uncertainty about the deal kept investors from rushing into riskier currencies.

On Friday, March U.S. Dollar Index futures settled at 96.745, down 0.214 or -0.22%.

Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart. The downtrend was reaffirmed on Friday when sellers took out three main bottoms at 96.555, 96.505 and 96.368.

A trade through 96.295 will signal a resumption of the downtrend. The main trend will change to up on a move through 98.045. This is highly unlikely. However, due to the prolonged move down in terms of price and time, the index begins the session inside the window of time for a potentially bullish closing price reversal bottom.

The main range is 94.665 to 98.735. The index is currently testing its 50% to 61.8% retracement zone at 96.700 to 96.220. Trader reaction to this zone will determine the longer-term direction of the index.

A short-term range may be developing between 98.045 and 96.295. If buyers can create enough upside momentum, we could see a rally back to its retracement zone at 97.170 to 97.380.

Daily Swing Chart Technical Forecast

Based on Friday’s close at 96.745, the direction of the March U.S. Dollar Index the rest of the session on Monday is likely to be determined by trader reaction to the main 50% level at 96.700.

Bullish Scenario

A sustained move over 96.700 will indicate the presence of buyers. If this move creates enough upside momentum then watch for a drive into the short-term 50% level at 97.170.

Bearish Scenario

A sustained move under 96.700 will signal the presence of sellers. If selling volume increases on the move then look for a retest of Friday’s low at 96.295, followed by the main Fibonacci level at 96.220.