U.S. Dollar Index (DX) Futures Technical Analysis – Friday’s Reversal Top Indicates Potential Momentum Shift
The U.S. Dollar closed lower against a basket of major currencies on Friday. After an early session rise, the index turned negative as a stock market surge led to a shift in investor sentiment, encouraging long dollar investors to shed the safe-haven greenback.
Early Friday, the U.S. Dollar climbed against its major counterparts in the European session on Friday, along with Treasury yields, as Federal Reserve Chairman Jerome Powell supported the likelihood of 50 basis point rate hikes at the next two meetings.
On Friday, the June U.S. Dollar Index settled at 104.621, down 0.276 or -0.26%. The Invesco DB US Dollar Index Bullish Fund ETF (UUP) finished at $27.97, down $0.08 or -0.30%.
“If the economy performs about as expected, it would be appropriate for there to be additional 50-basis point increases at the next two meetings,” Powell aid.
In U.S. economic news, data from the Labor Department showed that U.S. import prices were unexpectedly unchanged in the month of April after a sharp increase in the previous month. The Labor Department said import prices came in flat in April after surging by an upwardly revised 2.9 percent in March. The news suggests inflation may have peaked, which may be one of the reasons for the dollar’s reversal top.
Daily Swing Chart Technical Analysis
The main trend is up according to the daily swing chart, however, the closing price reversal top suggests momentum may be getting ready to shift to the downside. Taking out 104.500 will confirm the chart pattern and could trigger the start of a minimum 2-day correction.
A trade through 105.065 will negate the closing price reversal top and signal a resumption of the uptrend. The main trend will change to down on a move through 102.375.
The minor trend is also up. A trade through 103.405 will change the minor trend to down, confirming the shift in momentum.
The first two support levels are a pair of minor pivots at 104.235 and 103.720. The short-term support zone is 102.438 to 101.817. The main support zone is 101.398 to 100.532.
Daily Swing Chart Technical Forecast
The direction of the June U.S. Dollar Index early Monday is likely to be determined by trader reaction to 104.780.
Bullish Scenario
A sustained move over 104.780 will indicate the presence of buyers. This could lead to a quick test of 105.065.
Taking out 105.065 will reaffirm the uptrend. This could trigger an acceleration to the upside with 107.31 the next major target.
Bearish Scenario
A sustained move under 104.780 will signal the presence of sellers. Taking out 104.500 will confirm the closing price reversal top. This could trigger a further break into the minor pivot at 104.235.
If 104.235 fails then look for the selling to possibly extend into the next pivot at 103.720. This is the last potential support before the 103.405 minor bottom. This level is a potential trigger point for an acceleration to the downside.
For a look at all of today’s economic events, check out our economic calendar.
This article was originally posted on FX Empire
