US Dollar Technical Forecast: USD Range Intact Amid Government Shutdown

US Dollar Index Technical Forecast: USD Weekly Trade Levels (DXY)

US Dollar defends support at yearly lows post-Fed– trades back within multi-month range
USD October opening-range breakout to offer guidance- NFPs on hold amid government shutdown
DXY Resistance 99.68/75 (key), 99.58/77, 100.42- Support 96.94, 96.38 (key), 94.65/92

The US Dollar is holding firm after defending yearly lows post-FOMC and the broader multi-month range remains intact into the start of the month. While the October opening-range breakout is likely to offer the next clear directional signal, the ongoing government shutdown has put key NFP data on hold, leaving traders without a major catalyst this week. The fate of the Dollar now hinges on a breakout of this range- battlelines drawn on the DXY weekly technical chart.

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US Dollar Price Chart – USD Weekly (DXY)

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

Technical Outlook: In last month’s US Dollar Technical Forecast we noted that DXY was trading within a well-defined, “range just below resistance for the past six-weeks and we’re looking for a breakout of the September opening-range for guidance in the days ahead. From at trading standpoint, losses would need to be limited to 96.94 IF the index is heading for a larger recovery here with a close above 98.75 needed to fuel the next leg higher.” The index briefly registered an intraday low at 96.21 on the heels of the Fed but failed to mark a weekly close below support, with price trading back within the multi-month range into the October open.

The focus heading into the start of Q4 remains on a breakout with initial support unchanged at the 2021 high / 2025 close low at 96.94/98 and the June low at 96.38. Note that the median-line of a multi-year pitchfork rests just lower and a break / weekly close below this slope would be needed to mark resumption of the broader downtrend. Such a scenario would likely fuel another bout of accelerated losses with the next major technical consideration seen at 94.65/92- a region defined by the 78.6% retracement of the 2021 advance / March 2020 swing low. Look for a larger reaction there IF reached.

Initial weekly resistance is eyed at the July high-week close / 61.8% retracement of the July decline at 98.68/71- a break / weekly close above this threshold is needed to suggest a more significant low is in place / a larger reversal is underway. Subsequent resistance objectives eyed at 99.58/77- a region defined by the 2023 low, the April low-week close, and the 61.8% retracement of the broader May decline. Ultimately, a breach / weekly close above the 2024 low-week close (LWC) at 100.41 would be needed to shift the broader outlook back to the topside in the greenback.

Bottom line: The U.S. Dollar defended multi-year downtrend support last month with the index nearly marking a monthly Doji in September. The focus heading into October once again shifts to a breakout of this critical range near the yearly lows. From a trading standpoint, losses would need to be limited to 96.94 IF the index is indeed heading higher on this stretch with a close above 98.71 needed to fuel a larger recovery in the Dollar.

Keep in mind that the September Non-Farm Payroll figures are unlikely to be released this Friday amid the ongoing government shutdown and markets will likely continue to take cues from the barrage of headlines coming out of Washington. That said, expectations for interest rate cuts from the Fed have continued to build after today’s weak ADP data with Fed Fund Futures now pricing a 90% chance the central bank will cut another 50 basis points by the end of the year. Stay nimble into the October opening-range and watch the weekly closes here for guidance. I’ll publish an updated US Dollar Short-term Outlook once we get further clarity on the near-term DXY technical trade levels.

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--- Written by Michael Boutros, Sr Technical Strategist

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