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U.S. Dollar Index Futures (DX) Technical Analysis – Strengthens Over 97.690, Weakens Under 97.500

James Hyerczyk

The U.S. Dollar took a beating against a basket of major currencies on Tuesday with most of the damage inflicted by steep rallies by the safe-haven Japanese Yen and Swiss Franc. The Yen and Franc rallied against the greenback as risk appetite eased after U.S. President Donald Trump said a trade deal with China might have to wait until after the 2020 U.S. presidential election.

On Tuesday, the December U.S. Dollar Index settled at 97.681, down 0.110 or -0.11%.

Appetite for risk was also dampened after Trump on Monday said his administration would impose tariffs on metal imports from Argentina and Brazil and likely would impose more on a range of French goods.

Monday’s weak U.S. manufacturing report also continued to weigh on the dollar. The U.S. Institute for Supply Management said its index of national factory activity fell to a below-forecast 48.1 in November, indicating contraction in the sector.

At 02:49 GMT, December U.S. Dollar Index futures are trading 97.670, down 0.011 or -0.01%.

Daily December U.S. Dollar Index

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart. However, momentum is trending lower. The main trend will change to down on a trade through the last main bottom at 97.550. A move through 98.495 will negate the closing price reversal top and signal a resumption of the uptrend.

The main range is 99.305 to 96.885. Its retracement zone at 98.095 to 98.381 is resistance.

The short-term range is 96.885 to 98.495. The index is currently testing its retracement zone at 97.690 to 97.500. The last main bottom at 97.550 falls inside this zone. Trader reaction to this area will determine the near-term direction of the index.

Daily Swing Chart Technical Forecast

Based on yesterday’s price action and the current price at 97.670, the direction of the December U.S. Dollar Index the rest of the session on Wednesday is likely to be determined by trader reaction to the short-term 50% level at 97.690.

Bullish Scenario

A sustained move over 97.690 will indicate the presence of buyers. If this move is able to generate enough upside momentum then look for a possible rally into a pair of 50% levels at 98.040 to 98.095.

Bearish Scenario

A sustained move under 97.690 will signal the presence of sellers. The first downside targets are a main bottom at 97.550 and a Fibonacci level at 97.500.

The trend will change to down on a move through 97.550, but a move through 97.500 could trigger an acceleration to the downside with the next major target a longer-term 50% level at 97.140.

This article was originally posted on FX Empire