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U.S. Dollar Index (DX) Futures Technical Analysis – Failure at 94.770 Could Trigger Pullback to 93.775

The U.S. Dollar is trading lower against a basket of major currencies while hovering just south of a two-month peak reached last week. Helping to pressure the greenback is a surge in the British Pound and a steady Euro. Fundamentally, investors are saying doubts about economic recovery may be underpinning the dollar, but a slight increase in demand for riskier assets is helping to cap gains.

At 10:14 GMT, September U.S. Dollar Index futures are trading 94.415, down 0.267 or -0.28%.

A rebound in U.S. stocks early Monday is helping to curb the ascent of the dollar, considered a safe haven, but signs of a slowdown in the nascent recovery from the pandemic and political uncertainties have kept investors on guard.

The British Pound rose against the U.S. Dollar on Monday on hopes that Britain would secure a Brexit trade deal with the European Union by October or at least avoid a cliff-edge exit from the bloc.

The Bank of England and the European Union’s securities watchdog said on Monday they have agreed on the information-sharing arrangements needed for the bloc’s banks to continue using clearing houses in London from January.

In other news, data on U.S. currency futures positions released on Friday also pointed to upside potential in the dollar’s recovery, with speculators holding a big net short position in the currency.

U.S. Commodity Futures Trading Commission data showed speculators held a net short position of $33.989 billion, up from $31.524 billion the week before and near the highest level in almost 10 years.

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart. A trade through 94.795 will signal a resumption of the uptrend. The main trend will change to down on a move through 92.755.

The main range is 97.785 to 91.750. Its retracement zone at 94.770 to 45.480 is the primary upside target. This zone was tested last week and stopped the buying at 94.795. The area is controlling the near-term direction of the index.

The first minor range is 92.755 to 94.795. Its 50% level at 93.775 is the first potential downside target.

The second minor range is 91.750 to 94.795. Its 50% level at 93.275 is the second potential downside target.

Daily Swing Chart Technical Forecast

The early price action suggests that the main 50% level at 94.770 is providing the resistance and controlling the direction of the index.

Bearish Scenario

A sustained move under 94.770 will indicate the presence of sellers. Taking out Friday’s low at 94.225 will indicate the selling is getting stronger. If this creates enough downside momentum then look for a possible break into the first minor 50% level at 93.775.

Bullish Scenario

Overcoming and sustaining a rally over 94.770 will signal the presence of buyers. Taking out 94.795 will signal a resumption of the uptrend. This could lead to a test of the Fibonacci level at 95.480.

For a look at all of today’s economic events, check out our economic calendar.

This article was originally posted on FX Empire

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