Technical Analysis – Dollar Index futures bulls may face big challenge near the flat 200-day SMA

Melina Deltas, XM Investment Research Desk

The US dollar index futures rose above the short-term 20-day simple moving average (SMA) and is approaching the 40-SMA, creating the fourth green day in a row. The price is still developing within a downward sloping channel since October 2019.

The fast Stochastics and the RSI, signal that the bearish action is running out of fuel and hence a rebound of the price off the line is likely as the indicators are moving up. Furthermore, the MACD oscillator surpassed the trigger line, completing a bullish crossover and is heading towards the zero level.

Should the bulls continue to buy the index, it could have a quick test of the 200-day SMA, which overlaps with the 97.40 level. Running higher, the next stop could be the 100-day SMA currently at 97.70 before testing the 97.80 resistance. A stronger rally could help the price to exit the downward channel, shifting the medium-term bearish bias to bullish.

Otherwise, a decisive close below the 20-SMA could open the door for the latest low of 96.00. Further losses, could drive the index until the next crucial barrier of 95.34, reached on June 2019.

To sum up, US dollar index futures are looking bearish with a risk of an upside reversal as indicators are getting stronger.