Technical Analysis – Dollar Index futures search for a rebound near pivot point

Christina Parthenidou, XM Investment Research Desk

The US dollar index futures crashed below the short-term ascending line drawn from 95.34 and are now set to beat a longer support line stretched from March 2018. The fast-Stochastics and the RSI, however, signal that the bearish action is running out of fuel and hence a rebound off the line is likely as the indicators are hovering near oversold levels. Note that the market action has been also taking place around the lower bollinger band, increasing the odds for an upside reversal.

Should the bulls take over, the index could have a quick test of the 97.52 familiar resistance area, which is also where the 38.2% Fibonacci of the upleg from 94.60 to 99.30 lies. Running higher, the next stop could be the crossroads of the 50-day simple moving average (SMA) and the 23.6% Fibonacci of 98.20, a break of which could increase momentum towards the 98.94 peaks before the 28-month high of 99.30 comes into the spotlight.

Otherwise, a decisive close under the long-term upward sloping-line could trigger a sharper decline especially if this occurs under the 200-day SMA and the 50% Fibonacci of 96.95. In this case, traders could initially look for support within the 96.00-96.30 restrictive area and then more importantly near the 95.34 low, where any violation would put the 20-month-old upward pattern in doubt.

Summarizing, US dollar index futures are looking strongly bearish with a risk of an upside reversal as the oversold signals are getting stronger and the market action is taking place near a long-term support line.