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The U.S. Dollar soared against a basket of major currencies on Tuesday, hitting a one-year high against the Japanese Yen and its highest level versus the Euro since November, as increasing U.S. vaccinations and plans for a major stimulus package stoked inflation expectations and lifted U.S. Treasury yields to their highest level in 14-months.
On Tuesday, June U.S. Dollar Index futures settled at 93.320, up 0.365 or +0.39%.
The dollar index hit its highest level in four months, putting it on track for its best month since late 2016.
On Wednesday, President Joe Biden is set to outline how he intends to pay for a $3 trillion to $4 trillion infrastructure plan. Friday is a bank holiday, but the U.S. is still scheduled to release its February Non-Farm Payrolls report, with Federal Reserve policymakers so far citing slack in the labor market for their continued lower-for-longer stance on interest rates.
Daily Swing Chart Technical Analysis
The main trend is up according to the daily swing chart. The uptrend was reaffirmed on Tuesday when buyers drove the dollar index through the November 11, 2020 main top at 93.135. A trade through 91.290 will change the main trend to down.
The index will begin Wednesday’s session, up nine days from its last main bottom. This puts it inside the window of time for a potentially bearish closing price reversal top.
On the downside, a pair of Fibonacci levels at 92.510 and 92.200 are support.
Daily Swing Chart Technical Forecast
The direction of the June U.S. Dollar Index on Wednesday is likely to be determined by trader reaction to 93.135.
Bullish Scenario
A sustained move over 93.135 will indicate the presence of buyers. If this move is able to generate enough upside momentum then look for the rally to extend into the November 2, 2020 main top at 94.085. This move will tell us that the buying is real and not just buy stops.
Bearish Scenario
A sustained move under 93.135 will signal the presence of sellers. This will tell us that Tuesday’s breakout was fueled by weak buyers or buy stops.
If this move creates enough downside momentum then look for the selling to possibly extend into the Fibonacci level at 92.510.
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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