The December U.S. Dollar Index futures contract closed higher last week, primarily driven by hawkish comments from Fed Chair Janet Yellen. Traders also responded to a weaker Euro and the release of the Trump Administration’s long-awaited tax reform plan.
Yellen’s comments drove the chances of a Fed interest rate hike in December to 76%. This is up from 48% on September 19. This boosted U.S. Treasury yields which made the dollar a more attractive investment.
The Euro tumbled against the dollar on under certainty over the outcome of the German elections. The dollar was also supported by Trump’s tax reform plan which promises tax cuts for big business.
Weekly Technical Analysis
The main trend is down according to the weekly swing chart. The trend will turn up on a trade through 93.84. The next major top over this level is 97.30. A trade through 90.795 will signal a resumption of the downtrend.
The major support zone is 91.61 to 89.56. This zone provided support earlier in the month when the index bottomed at 90.795.
The short term range is 97.30 to 90.795. If the trend changes to up then buyers could drive the market into its retracement zone at 94.05 to 94.82.
Weekly Forecast
Based on last week’s close at 92.88 and the upside momentum, we’re looking for an early upside bias this week.
The first target is a long-term downtrending angle at 93.55. This is followed by the main top at 93.84 and the retracement zone at 94.05 to 94.82.
On the downside, the key uptrending angle is 92.80. Holding above this angle is also critical to the upside bias. If it fails then look for a labored break into a series of levels at 91.80, 91.61 and 91.30. The latter is the last potential support angle before the 90.795 main bottom.
There levels are bunched together this week so we’re going to say that 93.84 is the most critical because taking out this level will change the main trend to up.
This article was originally posted on FX Empire