The U.S. Dollar Index finished higher on Wednesday, breaking a pattern of four days of consecutive lower-highs and lower-lows. The index also posted an inside move, which suggests investor indecision and impending volatility. It could also be an early sign that the index is getting ready to shift direction.
The dollar’s strength against a basket of major currencies was fueled by better-than-expected U.S. economic data. The U.S. services sector expanded at a faster-than-expected pace in February, data from the Institute for Supply Management (ISM) showed. ADP and Moody’s Analytics said private payrolls jumped by 183,000 last month.
The Fed’s Beige Book report on Wednesday showed the U.S. economic activity expanded at a “modest to moderate” rate over the past week, citing coronavirus as a risk to the outlook.
On Wednesday, the March U.S. Dollar Index settled at 97.355, up 0.233 or +0.24%.
Daily Technical Analysis
The main trend is down according to the daily swing chart. A trade through 96.875 will signal a resumption of the downtrend. The main trend changes to up on a move through the last main top at 99.815. This is highly unlikely, however. At this point, all the bullish traders can hope for is a closing price reversal bottom or a 50% to 61.8% retracement of the last break.
The main range is 96.020 to 99.815. Its retracement zone at 97.470 to 97.920 is controlling the longer-term direction of the index. On Wednesday, the index was rejected on a test of the lower or Fibonacci level at 97.470.
The short-term range is 99.815 to 96.875. Its retracement zone at 98.345 to 98.690 is the primary upside target.
On Wednesday, the index was stopped on the upside by a steep downtrending Gann angle at 97.565. Overtaking this angle could trigger a surge into the main 50% level at 97.920. This is followed by the short-term 50% level at 98.345.
A sustained move under the uptrending Gann angle at 97.365 will indicate the presence of sellers. This could lead to a retest of this week’s low at 96.875.
Traders also reacted to the main Fibonacci level at 97.470. Crossing to the strong side of this level will indicate the selling is getting weaker or the buying a little stronger. If this move creates enough upside momentum then look for the rally to possibly extend into the main 50% level at 97.920.
This article was originally posted on FX Empire
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