US Dollar Index (DX) Futures Technical Analysis – Weekly Reversal Top Could Trigger 2 to 3 Week Correction
December U.S. Dollar Index futures finished lower last week, posting a potentially bearish closing price reversal top in the process.
Last week’s price action and lingering concerns over delays in U.S. tax reform could lead to a 2 to 3 week correction. Traders will be watching the movement in U.S. Treasury yields for direction this week.
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Weekly Technical Analysis
The main trend is up according to the weekly swing chart. However, last week’s closing price reversal top chart pattern is signaling a shift in momentum to the downside.
A trade through 95.07 will negate the chart pattern and signal a resumption of the uptrend. The next target would be 97.30.
A trade through 94.155 will confirm the closing price reversal top. This could trigger a 2 to 3 week break equal to 50% to 61.8% of the last rally.
The main range is 97.30 to 90.795. Its retracement zone is 94.048 to 94.815. This zone is controlling the longer-term direction of the market. Last week’s close was inside this zone.
The short-term range is 90.795 to 95.07. If there is a confirmation of the reversal top then its retracement zone at 92.933 to 92.428 will become the primary downside target.
Weekly Technical Forecast
Based on last week’s close at 94.278, the direction of the dollar index this week will be determined by trader reaction to the 50% level at 94.048.
Holding above 94.048 will indicate that buyers are still coming in to support the index. If this creates enough upside momentum then look for the rally to extend into a downtrending angle at 94.68, a Fibonacci level at 94.815 and a reversal top at 95.07.
Taking out 95.07 could trigger a rally into the downtrending angle at 95.99.
A sustained move under 94.048 will signal the presence of sellers. This could trigger an acceleration to the downside with the next target angle coming in at 93.30. This is followed by a 50% level at 92.933 and a Fibonacci level at 92.428.