US Dollar Short-term Outlook: USD Rally Hits Major Resistance Ahead of CPI

US Dollar Index Technical Outlook: USD Short-term Trade Levels

USD has broken out of its recent range and extended the rally into a major resistance zone.
Price is testing a key technical barrier near the yearly highs- weekly opening range taking shape just below
A reaction here could determine the next phase of the advance while failure would increase the risk of a pullback within the broader recovery structure
U.S. CPI on tap tomorrow: hotter-than-expected inflation report could provide the catalyst for a breakout
DXY Resistance 100.16/35 (key), 100.64/77, 101.14- Support 99.49/52 (key), 98.96, 98.63/68

The US Dollar is once again challenging a major resistance zone that has repeatedly stalled advances since the start of the year, with the weekly opening range forming just below this barrier. The broader recovery remains constructive, but bulls have yet to secure the breakout needed to validate the next leg higher. With CPI on deck and the Fed meeting looming, this resistance zone remains the key battleground for the Dollar.

Review my latest Weekly Strategy Webinar for an in-depth breakdown of this US Dollar technical setup and more. Join live on Monday’s at 8:30am EST.

US Dollar Index Price Chart – USD Daily

Chart Prepared by Michael Boutros, Sr. Technical Strategist; DXY on TradingView

Technical Outlook: In last month’s US Dollar Short-term Outlook we noted that DXY was testing a major resistance level and that, “From a trading standpoint, a good zone to reduce long-exposure / raise protective stops- losses would need to be limited to the 200-day moving average IF price is heading higher on this stretch with a close above 99.52 needed to fuel the next leg of the advance. Euro held below resistance zone for more than two-weeks with price pulling back nearly 0.8% before reversing sharply higher into the open of June trade.

A breakout on Friday extended more than 1.3% off the monthly low with the rally exhausting yesterday at the next major resistance hurdle at 100.16/34- a region defined by the 2024, the August high, the November high-day close (HDC) and the 2024 low-close. The focus is on a reaction off this zone in the days ahead with the long-bias vulnerable while below.

US Dollar Index Price Chart – USD 240min

Chart Prepared by Michael Boutros, Sr. Technical Strategist; DXY on TradingView

Notes: A closer look at USD price action shows DXY trading within the confines of an ascending pitchfork extending off the April / May lows with the median-line converging on key resistance over the next few days at 100.15/35. A rebound off the 25% parallel keeps the focus on a breakout of the weekly opening range heading into CPI tomorrow.

Initial support rests back at the 61.8% retracement of the late-March decline and the January high at 99.49/52 with near-term bullish invalidation now raised to the lower parallel. Losses below this slope would suggest a more significant high is in place and a larger reversal is underway towards the monthly open at 98.96. Ultimately a break / close below 98.63/68 (the 200-day moving average, May low & August high-day close) is needed for bears to re-assert control here.

A topside breach / daily close above this key pivot zone is needed to mark resumption of the uptrend with subsequent resistance objectives eyed at the yearly high & the 61.8% extension of the broader January advance at 100.64/77 and the 38.2% retracement of the 2025 decline at 101.14. Both levels of interest for possible downside topside exhaustion / price inflection IF reached.

Bottom line: The weekly opening-range is taking shape just below pivotal resistance with key U.S. inflation data on tap tomorrow. From a trading standpoint, losses would need to be limited to the lower parallel IF the index is heading higher on this stretch with a close above 100.35 needed to fuel the next major leg of the rally.

Tomorrow’s inflation report is expected to show an increase in the pace of price growth with the May Core Consumer Price Index (CPI) expected to rise to 2.9% y/y while headline CPI is seen climbing to 4.2% y/y. On the heels of Friday’s stellar Non-Farm Payrolls figures, the Fed’s focus remains squarely on the inflation side of the dual mandate and hotter-than-expected figures tomorrow could further stoke interest rate expectations. As of now, traders are pricing a nearly 70% probability the central bank will hike at least 25 basis points before the end of the year. For the Dollar, the data has the potential to fuel the next leg or further trim this recent breakout.

Keep in mind Warsh and Company take the stage next week with his inaugural FOMC rate decision on tap Wednesday. Stay nimble into the releases and watch the weekly close for guidance here. Review my latest US Dollar Weekly Forecast for a closer look at the longer-term DXY technical trade levels.

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Written by Michael Boutros, Senior Technical Strategist

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