The U.S. Dollar is inching higher against a basket of major currencies early Monday in an early sign that today may be a risk off trading session. Global equity markets are trading lower and investors are moving money into the U.S. Dollar as a safe-haven asset.
The catalysts behind the strength in the dollar are concerns over rising tensions between the United States and China over President Trump’s threat of new tariffs against the world’s second largest economy.
June U.S. Dollar Index futures are trading 99.340, up 0.240 or +0.24%.
On Sunday, U.S. President Donald Trump accused China of mishandling the outbreak of the novel coronavirus and threatened new tariffs on Beijing. Trump said he believed the virus may have originated in a virology lab in Wuhan, the Chinese city where the outbreak began. The Chinese state-backed Wuhan Institute of Virology has dismissed the allegations, and other U.S. officials have downplayed their likelihood.
Stock market weakness is driving investors into the safe-haven U.S. Dollar, but some traders believe that the start of another trade war with China would be dollar-negative as that would imply outflows from greenback-denominated assets.
Daily June U.S. Dollar Index
Daily Swing Chart Technical Analysis
The main trend is down according to the daily swing chart. The trend turned down on Friday when sellers took out the previous main bottom at 98.815.
A trade through 98.765 will signal a resumption of the downtrend. This could lead to a quick test of the next main bottom at 98.345. The main trend will change to up on a trade through 100.975.
The main range is 94.530 to 103.960. Its retracement zone at 99.245 to 98.130 is the primary downside target. This zone is currently being tested. It is controlling the longer-term direction of the index.
The short-term range is 98.345 to 101.030. Its 50% level at 99.690 is the next upside target. Overtaking this level will indicate the counter-trend rally is getting stronger.Advertisement
Daily Swing Chart Technical Forecast
Based on the early price action, the direction of the June U.S. Dollar Index the rest of the session on Monday is likely to be determined by trader reaction to the main 50% level at 99.245.
A sustained move over 99.245 will indicate the presence of buyers. This could lead to a quick test of the pivot at 99.690, followed closely by another pivot at 99.870. Overtaking the second pivot will indicate the buying is getting stronger. This is a potential trigger point for an acceleration to the upside.
A sustained move under 99.245 will signal the presence of sellers. The first target is the minor bottom at 98.765.
Taking out 98.765 will signal a resumption of the downtrend. This could lead to a test of the next main bottom at 98.345, followed by the major Fibonacci level at 98.130.
The Fib level at 98.130 is the most important level on the daily chart. We could see a steep break if this price level fails since the next major support doesn’t come in until 94.530.