The U.S. Dollar is inching lower against a basket of currencies early Monday. The greenback is actually straddling the previous session’s close as investors continue to assess the impact of Friday’s stronger-than-expected June U.S. Non-Farm Payrolls report on Federal Reserve policy.
The jump in payrolls offset the rise in the Unemployment Rate and the slower-than-expected Average Hourly Earnings growth. This news triggered a surge in U.S. Treasury yields which made the U.S. Dollar a more attractive investment.
At 08:15 GMT, September U.S. Dollar Index futures are trading 96.825, down 0.020 or -0.02%.
The market still expects the Fed to cut its benchmark rate by 25 basis points at its July 30-31 policy meeting, but they are nervous enough to lighten up their positions. A speech and testimony by Fed Chair Jerome Yellen later this week could clarify matters so look for heightened volatility.
Daily Technical Analysis
The main trend is down according to the daily swing chart, however, momentum has been trending higher since the formation of the closing price reversal bottom at 95.365 on June 25. The move has already exceeded price and time expectations.
The main trend will change to up on a trade through 97.265. A move through 95.365 will negate the closing price reversal bottom and signal a resumption of the downtrend.
The index is up nine sessions since the last main bottom so today’s session begins with the market in the window of time for a closing price reversal top.
The short-term range is 97.265 to 95.365. Its retracement zone at 95.540 to 96.315 is the first support area.
The main range is 97.715 to 95.365. Its retracement zone at 96.205 to 95.850 is the major support area.
Daily Technical Forecast
Based on the early price action, the direction of the September U.S. Dollar Index on Monday is likely to be determined by trader reaction to the downtrending Gann angle at 96.830.
A sustained move over 96.830 will indicate the presence of buyers. If this move can generate enough upside momentum then look for the rally to possibly extend into the downtrending Gann angle at 97.045. This angle stopped the rally on Friday. Overcoming it will indicate the buying is getting stronger with the next targets another downtrending Gann angle at 97.215 and the main top at 97.265.
Taking out the main top will change the main trend to up. This could also trigger an acceleration to the upside with the next targets coming in at 97.465, 97.625 and 97.715.
A sustained move under 96.830 will signal the presence of sellers. The first downside target is the downtrending Gann angle at 96.715. This is the trigger point for an acceleration into the support cluster at 96.540 to 96.490.
If 96.490 fails as support then look for the selling to possibly extend into the two 50% levels at 96.315 and 96.205.
This article was originally posted on FX Empire