US Dollar Index (DX) Futures Technical Analysis – Sharp Breakout Puts 105.470-105.155 Value Zone On Radar

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The US Dollar is down sharply against a basket of major currencies in Tuesday’s mid-session as the Federal Reserve is expected to be less aggressive at its next meeting later this month. The index also came under pressure as the euro rose sharply following reports that policymakers at the European Central Bank (ECB) are expected to discuss a 50 basis point rate hike during their Thursday meeting.

As of 4:35 p.m. GMT, September US Dollar Index futures are trading at 106.505, down 0.725 or -0.68%. The Invesco DB US Dollar Index Bullish Fund ETF (UUP) is at $28.48, down $0.22 or -0.77%.

Reuters reported that ECB officials were considering a 50 basis point rate hike on Thursday, instead of a 25 basis point move previously suggested by them.

In US economic news, new home construction activity in the United States fell to a nine-month low in June and permits for new construction projects also fell, the latest indication of a housing market down as soaring mortgage rates reduce affordability.

Housing starts fell at a seasonally-adjusted annual rate of 1.559 million units last month, the lowest level since September 2021, the Commerce Department said Tuesday. Building permits for single-family homes – an indicator of future construction – fell 8% to a rate of 967,000 units, the lowest since June 2020.

September US Dollar Daily Index

Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart, however, the trend is down. A trade through 109.140 will signal a resumption of the uptrend. A move through 103.200 will change the main downtrend.

The minor trend is down. It fell on Monday when the sellers took out 107.270. This move shifted the momentum down.

The short-term range is 103.200 to 109.140. Its retracement zone at 106.170 to 105.470 is the next downside target and potential support area.

The middle range is 101.170 to 109.140. Its retracement zone at 105.155 to 104.215 is a more important support zone.

The two retracement areas combine to form a support cluster at 105.470 to 105.155. Since the main trend is up, look for buyers to test this area.

On the upside, resistance is a long-term Fibonacci level at 107.780.

Daily Swing Chart Technical Forecast

Traders’ reaction to the short-term 50% level at 106.170 will likely determine the direction of the US Dollar Index from September through Tuesday’s close.

Bullish scenario

A sustained move above 106.170 will indicate the presence of buyers. If this move creates enough bullish momentum, look for a push towards the long-term Fibonacci level at 107.780.

Downside scenario

A sustained move below 106.170 will signal the presence of sellers. If this generates enough downside momentum, expect selling to eventually extend into the support cluster at 105.470-105.155. Look for buyers on the first test of this area. For an overview of all of today’s economic events, check out our economic calendar.

This article originally appeared on FX Empire

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