Technical Analysis – US dollar index futures spike above 99.00, enter overbought waters

Christina Parthenidou, XM Investment Research Desk

The clear upside direction in the RSI and the positive slope in the Stochastics are framing a bullish picture for the short-term, though with the indicators entering overbought waters, the positive momentum could soften soon. Friday’s closing price above the upper Bollinger band is another indication that room for improvement could be limited.

In case of a downside reversal, the 98.00 barrier could act as immediate support before last week’s trough of 97.50 grabs attention. Another step lower could bring the lower Bollinger band, currently around 97.00, into scope, while a significant extension under the 200-day simple moving average (SMA) could prove more challenging.

Should the market close comfortably above the 99.00 mark, resistance could be next found within the 100.00-100.50 area. Higher, traders could keep a close eye on the 101.25 and 101.75 levels.

In the medium-term time-frame, the rebound in the 50-day SMA is feeding optimism for an even more positive outlook.

Summarizing, US dollar index futures are looking bullish in the short-term, though additional gains could appear limited as the market seems to be trading in the overbought zone.