The U.S. Dollar is trading higher against a basket of currencies on Tuesday ahead of the start of the Federal Reserve’s two-day monetary policy meeting. The index is being primarily supported by a weaker Euro. The dollar is also posting gains against the British Pound, Canadian Dollar and Swiss Franc. Gains are being limited by a strong Japanese Yen.
At 08:43 GMT, September U.S. Dollar Index futures are trading 97.140, up 0.085 or 0.10%.
The dollar index could turn higher quickly if the Euro continues to weaken. The single-currency is being pressured by dovish comments from European Central Bank President Mario Draghi. Just a short while ago, Draghi defended the tools that the organization has available, saying that its asset purchase program still has considerable headroom.
Draghi also said that the ECB could cut interest rates again or provide asset purchases if inflation doesn’t reach its target.
“The European Treaty requires that our actions are both necessary and proportionate to fulfil our mandate and achieve our objective, which implies that the limits we establish on our tools are specific to the contingencies we face. If the crisis has shown anything, it is that we will use all the flexibility within our mandate to fulfil our mandate – and we will do so again to answer any challenges to price stability in the future,” Draghi said.
Daily Technical Analysis
The main trend is up according to the daily swing chart. The uptrend was reaffirmed just a short while ago when buyers took out yesterday’s high. The swing chart shows there is room to the upside with the next main top targets coming in at 97.625 and 97.715.
The main trend will change to down on a trade through 95.890. This is highly unlikely, but the Euro is inside the window of time for a closing price reversal top.
The main range is 97.715 to 95.890. Its retracement zone at 97.020 to 96.805 is controlling the near-term direction of the index. Holding above this zone will help support the upside bias.
Daily Technical Forecast
Based on the early price action and the current price at 97.140, the direction of the September U.S. Dollar Index is likely to be determined by trader reaction to the downtrending Gann angle at 97.155.
A sustained move over 97.155 will indicate the presence of buyers. If this move can create enough upside momentum then look for an acceleration to the upside with the next Gann angle target coming in at 97.435. Look for sellers on the first test of this angle.
Overtaking 97.435 could trigger a further rally into another downtrending Gann angle at 97.575. This is the last potential resistance angle before the 97.625 and 97.715 main tops.
A sustained move under 97.155 will signal the return of sellers. This could trigger a pullback into the Fibonacci level at 97.020. If this level fails then look for a break into 96.805 and 96.765.
This article was originally posted on FX Empire