US Dollar Technical Forecast: USD Stabilizes After NFP – CPI to Decide the Next Move

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

DXY steadied after a nearly 4% drop from the January high, holding above support.
Weekly range breakout to offer guidance on whether a more significant low is in place.
Break below support would reopen downside risk toward 95.
Strong NFP release shifts focus to key inflation data on Friday- CPI on tap.
Resistance 99.24, 98.55 (key), 99.50/57- Support 96.98, 96.22/48 (key), 94.65/97

The US Dollar has paused its recent slide, stabilizing above a critical support band after failing to extend losses beyond the 2025 low-close. The recovery has been modest, leaving price trapped within a clearly defined range beneath resistance and above structural support. With January CPI due this week, attention now shifts to whether incoming data can provide the catalyst needed to resolve this compression. A decisive breakout from the current range is likely to determine whether the Dollar confirms a more significant low or resumes its broader downtrend. Battle lines drawn on the DXY weekly technical chart.

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

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, “testing initial resistance, and the focus is on a reaction off this mark next week. From a trading standpoint, losses should be limited to 98.24 IF the index is heading higher on this stretch..” USD broke lower the following week with price plunging more than 3.9% before rebounding into the close of the month.

Despite the losses, the bears were unable to secure a close below the 2025 low-close at 96.98 with the index rallying more than 2.5% off the low. Is a more significant low in place? This week’s close in relation to this level will be key.

Weekly support rests with the 2025 swing low and the 61.8% retracement of the most recent advance at 96.22/48. A break / weekly close below this threshold would threaten resumption of the broader downtrend toward 94.65/97- a region defined by the March 2020 low, the 78.6% retracement of the 2020 advance, and the 100% extension of the 2022 decline. Look for a larger reaction there IF reached.

Yearly open resistance is eyed at 98.24 and is backed closely by the 61.8% retracement of the November decline at 98.55. A breach / weekly close above this threshold is needed to suggest a more significant low is in place and a larger trend reversal is underway. Subsequent resistance is eyed with the 52-week moving average, which is currently near the January high near 99.50/57.

Bottom line: U.S. Dollar recovery pulled back into support this week and the focus is on a breakout of this week’s range for guidance. From a trading standpoint, losses would need to be limited to 96.22 IF price is heading higher on this stretch with a close above 98.55 needed to suggest a larger reversal is underway. That said, it is important to note that a break lower from here could fuel another bout of accelerated losses for the greenback with the next major technical consideration eyed just below the 95-handle.

Keep in mind we get the release of key US inflation data this week with the January Consumer Price Index (CPI) on tap Friday. This print will be critical on the heels of today’s stronger-than-expected Non-Farm Payroll report. With the labor market stabilizing, the Federal Reserve may be less willing to cut rates while inflation remains above the 2% target. Fed Fund Futures have shifted since this morning’s jobs data with markets now currently pricing just a 60% probability the first-rate cut will be delivered in June. Stay nimble into the release and watch the weekly closes here for guidance. Review my latest US Dollar Short-term Outlook for a closer look at the near-term DXY technical trade levels.

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--- Written by Michael Boutros, Senior Technical Strategist

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