U.S. Dollar Index Futures (DX) Technical Analysis – Trade Through 97.170 Could Trigger Start of Steep Break
The U.S. Dollar finished slightly higher against a basket of currencies on Tuesday in a lackluster trade. Most banks and institutions were off for the holidays. The Forex markets were essentially closed for Christmas on Wednesday with most major regions on bank holidays. The charts indicate there were some fireworks in the form of “Flash” moves, but they were meaningless and didn’t even show up on the dollar index chart.
On Tuesday, March U.S. Dollar Index futures settled at 97.251, up 0.016 or +0.02%.
Daily Swing Chart Technical Analysis
The main trend is down according to the daily swing chart. However, momentum has been trending higher since the formation of the closing price reversal bottom on December 13 at 96.295.
A trade through 98.045 will change the main trend to up. A move through 96.295 will signal a resumption of the downtrend.
After a six-day counter-trend rally, the index posted a closing price reversal top on December 23 at 97.405. A trade through 97.170 will confirm the chart pattern. This would likely signal the end of the counter-trend rally. Furthermore, a secondary lower top will form. This could develop into a potentially bearish chart pattern.
The short-term range is 98.045 to 96.295. Its retracement zone at 97.170 to 97.380 is resistance. It stopped the rally at 97.405 on Tuesday.
The minor range is 96.295 to 97.405. If the closing price reversal top is confirmed with a trade through 97.170 then look for the selling pressure to extend over the next 2 to 3 days into the 50% level at 96.850.
The long-term range is 94.665 to 98.735. Its retracement zone at 96.700 to 96.220 is major support. It stopped the selling at 96.295 on December 13, triggering the start of the six-day counter-trend rally.
Daily Swing Chart Technical Forecast
The chart-term indicates that the direction of the March U.S. Dollar Index on Thursday is likely to be determined by trader reaction to the 50% level at 97.170.
Bearish Scenario
A sustained move under 97.170 will indicate the presence of sellers. This could trigger an acceleration to the downside with the first target the minor 50% level at 96.850. Watch for a technical bounce on the first test of this level. If it fails then look for the selling to possibly extend into the major 50% level at 96.700.
Bullish Scenario
A sustained move over 97.170 will signal the presence of buyers. The first two upside targets are 97.380 and 97.405.
Trading between 97.170 and 97.405 will indicate a neutral tone in the market, while taking out 97.405 could trigger an acceleration to the upside with the next major top coming in at 98.045.
This article was originally posted on FX Empire
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