Yahoo Finance US Dollar Index (DX) Futures Technical Analysis – Chart Pattern Indicates Volatile Move is Coming
Fears over a possible U.S. government shutdown weighed on the U.S. Dollar on Friday. It remained in a position to close lower for a fifth week as it held near a three-year low versus a basket of currencies.
March U.S. Dollar Index futures were driven to 89.960, matching its low from earlier in the week on January 17. The price level was fiercely defended and prices were driven back above the opening, stopping slightly below the high for the session.
The price action clearly shows a set-up that could trigger a volatile response on Monday.
The short-term range is 90.765 to 89.960. Its 50% level or mid-point comes in at 90.36. A close on this level will indicate investor indecision, likely fueled by uncertainty over the outcome of the negotiations to keep the U.S. government open.
Daily Swing Chart Analysis
The main trend is down according to the daily swing chart. A trade through 89.960 will signal a resumption of the downtrend. This price could be the trigger point for an acceleration to the downside.
The daily chart shows there is plenty of room to break since the next major price target is 88.067, the December 16, 2014 main bottom.
On the upside, the key level is the minor top at 90.765. Overcoming this level will indicate the short-covering is getting stronger. This move could create the upside momentum needed to challenge another former bottom at 91.00.
The current main range is 92.360 to 89.960. If there is enough upside momentum we could see a challenge of its retracement zone at 91.16 to 91.44.
Forecast
The technical set-up is there. Now all we need is a catalyst. The catalyst is likely going to be the decision about the government shutdown.
If the government is shut down over the week-end then the dollar index is likely to spike through 89.960 with 88.067 the next major target.
If a deal is made to keep the government open then short-covering could trigger a volatile move through 90.765 with 91.16 to 91.44 the next target zone.
This article was originally posted on FX Empire
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