December U.S. Dollar Index futures fell from their highs on Friday on political news regarding the Russian investigation and on the U.S. Senate’s decision to postpone a vote on the tax bill.
Mild risk-off sentiment drove the dollar lower on reports Michael Flynn my implicate President Donald Trump in the Russian investigation. Early Friday, retired Lieutenant General Michael Flynn pleaded guilty to knowingly making materially false, fictitious and fraudulent statements to FBI agents, in a plea hearing in a Washington, D.C. federal court.
Bearish U.S. Dollar traders are afraid Flynn would testify that he was directed by the Trump administration to make contact with Russia.
Late Friday, the Senate Republicans narrowly passed a bill to overhaul the American tax system. The 51-49 vote brings the GOP closer to its promise of dramatically remaking U.S. tax law under a Republican-led government.
The GOP still needs to overcome significant disagreements for the House and Senate to craft a joint bill and send it to the President for his signature.
Daily Swing Chart Analysis
The main trend is down according to the daily swing chart. A trade through 92.43 will signal a resumption of the downtrend. This could trigger an acceleration to the downside since the next main bottom doesn’t come in until 91.215. A trade through 93.465 will change the main trend to up.
The main range is 90.795 to 95.070. Its retracement zone at 93.93 to 92.43 is currently being tested. This zone is controlling the longer-term direction of the dollar index.
The short-term range is 94.085 to 92.430. Its retracement zone at 93.26 to 93.45 provided resistance last week.
The intermediate range is 95.070 to 92.430. Its retracement zone at is additional resistance at 93.750 to 94.06.
Daily Swing Chart Forecast
Based on Friday’s close at 92.84, the direction of the dollar index on Monday is likely to be determined by trader reaction to the major 50% level at 92.93.
A sustained move under 92.93 will indicate the presence of sellers. This could drive the index into the support cluster at 92.43. Look out to the downside if this price is taken out with conviction. The daily chart indicates there is plenty of room to the downside with the next major target the September 20 bottom at 91.215.
A sustained move over 92.93 will signal the presence of buyers. This could lead to labored rally into potential resistance at 93.26, 93.45 and 93.465.
Overtaking 93.465 will change the trend to up, but don’t expect a breakout to the upside because of potential resistance levels at 93.75, 94.06 and 94.085.