The U.S. Dollar is edging higher against a basket of currencies early Monday with the market receiving support from a slight rise in U.S. Treasury yields. Besides the direction of yields, the index will largely be affected by the movement in the Euro.
With the markets pricing in a 100% chance of a 25-basis point rate cut at the end of July, the focus shifts to the 50-basis point rate cut which currently has about a 30% percent chance of occurring. Influencing the index today will be the Empire State Manufacturing Index and a speech by FOMC Member John Williams.
At 09:32 GMT, September U.S. Dollar Index futures are trading 96.460, up 0.055 or +0.06%.
Daily Technical Analysis
The main trend is down according to the daily swing chart. A trade through 97.195 will change the main trend to up. A move through 95.365 will signal a resumption of the downtrend, however, sellers have to take out a series of retracement levels before the index gets there.
The short-term range is 95.365 to 97.195. Its retracement zone at 96.280 to 96.065 is one downside target. The second target is the major retracement zone at 96.205 to 95.850. Combining the two retracement zones makes 96.280 to 96.205 the key support area today.
Daily Technical Forecast
Today’s direction will be determined by momentum.
If the downside momentum continues then look for a potential drive into a short-term 50% level at 96.280, an uptrending Gann angle at 96.240 and a longer-term 50% level at 96.205. Watch for a technical bounce on the first test of this area.
If 96.205 fails as support then look for the selling to possibly extend into the short-term Fibonacci level at 96.065.
If momentum shifts to the upside then look for a drive into the downtrending Gann angle at 96.560. Sellers could return on a test of this angle.
Taking out 96.560 is likely to generate the upside momentum needed to challenge a resistance cluster at 96.670 to 97.695. Since the main trend is down, look for sellers to come in on a test of this area.
This article was originally posted on FX Empire
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