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U.S. Dollar Index Futures (DX) Technical Analysis – Shift in Momentum Could Lead to Change in Trend

James Hyerczyk

The U.S. Dollar is trading higher against a basket of major currencies on Tuesday with most of the rally being driven by a weaker Euro and better-than-expected U.S. retail sales.

The Euro fell after the ZEW economic sentiment survey in German deteriorated more sharply than expected in July, with the ZEW institute pointing to the unresolved trade dispute between China and the United States as well as political tensions with Iran.

Additionally, U.S. retail sales increased more than expected in June, pointing to strong consumer spending. The Commerce Department said on Tuesday retail sales rose 0.4% last month as households stepped up purchases of motor vehicles and a variety of other goods. U.S. Treasury yield rose on the retail sales news, making the dollar a more attractive investment.

Traders will now shift their focus to a speech by Fed Chair Jerome Powell at 17:00 GMT. They will be looking for clues as to what it will take for the Fed to change policy at its July 30-31 meeting.

At 15:01 GMT, the September U.S. Dollar Index is trading at 96.960, up 0.390 or +0.40%.

Daily September U.S. Dollar Index

Daily 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 June 25 at 95.365. Yesterday’s closing price reversal bottom at 96.375 is supporting the shift in momentum.

A trade through 96.195 will change the main trend to up. This could lead to a breakout over 97.265 with 97.625 and 97.715 the next major upside targets.

The major support is the 96.205 to 95.850 retracement zone.

Daily Technical Forecast

Based on the early price action and the current price at 96.960, the direction of the September U.S. Dollar Index the rest of the session is likely to be determined by trader reaction to a pair of downtrending Gann angles at 96.955 and 96.885.

Bullish Scenario

A sustained move over 96.955 will indicate the presence of buyers. If this creates enough upside momentum then look for the rally to possibly extend into a short-term downtrending Gann angle at 97.040, followed closely by a long-term downtrending Gann angle at 97.121. The latter is the last potential resistance angle before the 97.195 and 97.265 main tops.

Taking out 97.265 could trigger an acceleration to the upside.

Bearish Scenario

A sustained move under 96.885 will signal the return of sellers. The daily chart shows there is plenty of room to the downside with the next two target angles coming in at 96.640 and 96.530.

This article was originally posted on FX Empire