US Dollar Short-term Outlook: USD Tests Critical Support Zone

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

US Dollar plunges nearly 2.2% in August- testing key support at monthly range lows
USD risk for price inflection into monthly cross- Core PCE, Non-Farm Payrolls on tap
DXY Resistance 99.69, 99.22, 99.58 (key)- Support 97.71/86 (key), 97.21, 96.65/78

The US Dollar has come under renewed pressure, with the DXY Index sliding into a critical support zone. This area has defined the floor for recent trade and marks a pivotal inflection point for near-term direction. Battle lines are drawn on the DXY short-term technical charts heading into the September opening-range.

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 my last US Dollar Short-term Outlook we noted that the DXY, “pullback is searching support as the bulls attempt to validate the July breakout. From a trading standpoint, losses should be limited to the lower parallel IF price is heading higher on this stretch with a close above 100.35 needed to fuel the next major leg of the advance.” The index dropped into lateral support days later with the bulls holding this last line of defense for over two weeks now. Risk for price inflection into this zone with the immediate focus still on a breakout of the Friday 8/22 outside-reversal candle for guidance.

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 just above key support at 97.71/86- a region defined by the 2018 swing high, the objective weekly open, and the e61.8% retracement of the July advance. A break / close below this threshold is needed to invalidate the July advance / threaten resumption of the broader downtrend. Subsequent support objectives seen at the 78.6% retracement at 97.21, the 2025 low-day close (LDC) / July open at 96.65/78, and the yearly low at 96.38.

Initial resistance is eyed at the May low at 98.69 and is backed by the 61.8% retracement of the monthly range at 99.23 and the 2023 low at 99.258- both levels of interest for possible topside exhaustion / price inflection IF reached. Ultimately, a breach / close above key resistance at the 2024 low / low close at 100.15/35 is needed to suggest a larger trend reversal is underway.

Bottom line: The US Dollar has pulled back into key support at the monthly range lows, and the focus is on a possible inflection off this mark in the days ahead. From a trading standpoint, rallies would need to be limited to 99.58 IF price is heading lower on this stretch with a break below the July up-slope / 97.71 needed to fuel the next leg of the decline.

Keep in mind we get the release of the Core Personal Consumption Expenditure tomorrow into the extended holiday weekend with Non-Farm Payrolls on tap next week. Stay nimble into the monthly cross and watch the weekly closes here for guidance. 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, Sr Technical Strategist with FOREX.com

Follow Michael on X @MBForex

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