U.S. Dollar Index (DX) Futures Technical Analysis – Momentum Shifts Lower Ahead of PPI, Retail Sales Reports

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The U.S. Dollar is trading lower against a basket of major currencies on Wednesday. The selling pressure is being fueled by strength in the Euro and the British Pound as well as some takeback in the Japanese Yen ahead of U.S. PPI and Retail Sales data.

At 12:30 GMT, the March U.S. Dollar Index is at 101.865, down $0.276 or -0.27%. On Tuesday, the Invesco DB US Dollar Index Bullish Fund ETF (UUP) settled at $27.55, up $0.08 or +0.27%.

Sterling rose against the U.S. Dollar to its highest level in more than a month even as consumer price inflation fell to a three-month low as core CPI failed to moderate, remaining at 6.3%. The number suggests it may be too early for the Bank of England to call it quits on rate hikes.

The Euro strengthened after European Central Bank member Francois Villeroy de Galhau said it was too early to speculate about what the central bank would do at the March meeting. His comments may have been in response to media reports on Tuesday that said the ECB could slow its pace of tightening further in March.

The Japanese Yen is trading lower against the U.S. Dollar, but the currency has trimmed much of its earlier losses. The currency tumbled early in the session after the Bank of Japan (BOJ) surprised traders by maintaining ultra-low interest rates. Speculators had bet heavily on the central bank relaxing its yield curve control policy further and thereby, setting up an interest rate hike at its next meeting.

U.S. Dollar gains are also being capped by expectations the Federal Reserve will limit the size and slow the duration of its interest rate hiking strategy. Traders will be eyeing today’s U.S. PPI and retail sales data to see if the data confirms this outlook.

Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart. A trade through 101.465 will signal a resumption of its downtrend.

The minor trend is also down. A trade through 102.655 will change the minor trend to up. This will shift momentum to the upside.

The minor range is 101.465 to 102.655, making its pivot at 102.060 the nearest resistance. The May 24, 2022 main bottom at 101.00 is the nearest support.

Daily Swing Chart Technical Forecast

Trader reaction to the minor pivot at 102.060 is likely to determine the direction of the March U.S. Dollar Index on Wednesday.

Bearish Scenario

A sustained move under 102.060 will signal the presence of sellers. The first downside target is the main bottom at 101.465, followed by another main bottom at 101.000.

Bullish Scenario

A sustained move over 102.060 will indicate the presence of buyers. This could trigger a surge into the minor top at 102.655. Momentum will shift on a trade through this level. This could eventually extend the short-covering rally into a long-term Fibonacci level at 103.664.