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U.S. Dollar Index (DX) Futures Technical Analysis – Main Trend Changes to Up on Trade Through 91.605

James Hyerczyk
·2 min read

The U.S. Dollar rose to its highest level since February 5 against a basket of peers on Tuesday as underlying concerns about rising bond yields drove investors back into safe-haven assets.

According to Reuters, rising yields have spooked markets in recent weeks, with participants worried that an economic recovery from the impact of COVID-19, combined with fiscal stimulus, could cause a jump in inflation from pent-up consumer demand when lockdowns end.

At 11:01 GMT, March U.S. Dollar Index futures are trading 91.215, up 0.179 or +0.20%.

Helping to boost the dollar index was a weaker Euro. A move in the single-currency tends to have a big effect since it represents about 57% of the index.

ECB and Fed Divergence Supporting Greenback

President Christine Lagarde said the ECB will prevent a premature increase in borrowing costs for firms and households.

However, Richmond Federal Reserve President Thomas Barkin said on Monday the uptick in long-term bond yields so far seems to suggest and adjustment to stronger growth and inflation outlook.

Atlanta Fed President Raphael Bostic said last week that bond yields remain comparatively low, while Federal Reserve Chair Jerome Powell has not appeared unduly concerned by rising bond yields.

Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart, however, momentum is trending lower. The main trend will change to up on a trade through 91.605, while a move through 89.675 will signal a resumption of the downtrend.

The minor trend is up. This move shifted momentum to the upside.

The main range is 94.25 to 89.165. Its retracement zone at 91.710 to 92.310 is the primary upside target. A test of this zone could stop the rally, or trigger an acceleration to the upside so watch the price action and read the order flow when the index gets there.

The short-term range is 89.165 to 91.605. The market is currently trading on the strong side of this zone, making it support.

Daily Swing Chart Technical Forecast

If the upside momentum continues then look for a drive into 91.605, followed by 91.710. We could see a technical bounce on the first test of these levels, but look for an acceleration to the upside on a sustained move over 91.710.

The inability to follow-through to the upside will signal the presence of sellers or indicate the buying is slowing. This could trigger a pullback into 90.540, followed by 90.385.

For a look at all of today’s economic events, check out our economic calendar.

This article was originally posted on FX Empire