US Dollar Short-term Outlook: USD Bears Test July Breakout
US Dollar bears are pressuring the July breakout, with the post-NFP sell-off now approaching uptrend support. Battle lines drawn on the DXY short-term technical chart.
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US Dollar Index Technical Outlook: USD Short-term Trade Levels
- US Dollar reverses from technical resistance- plunges nearly 1.7% post-NFPs
- USD bulls eye support at July uptrend- limited data on tap until CPI next week
- DXY Resistance 99.58/62, 100.15/35 (key), 100.98- Support 98.65/69, 98.31, 97.71 (key)
The US Dollar Index plummeted from resistance on the heels of Friday’s disappointing jobs report with the USD bears looking to challenge the July breakout. Battle lines are drawn on the DXY short-term technical charts heading into the August opening-range.
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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 DXY was threatening the multi-month downtrend and that a, “topside breach / close above this slope (red) is needed to suggest a more significant low is in place / larger trend reversal is underway with subsequent resistance eyed at the June open / 2023 low at 99.40/58 and the 2012 low-close at 100.35- both levels of interest for possible topside exhaustion / price inflection IF reached.” The index broke higher that day with price registering an intraday high at 100.26 before reversing sharply on the heels of the Non-Farm Payroll report on Friday. The decline extended nearly 1.7% into the August open and we’re on the lookout for a possible exhaustion-low in the days ahead IF the July breakout is to remain viable.
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 the index trading within an ascending pitchfork extending off the July lows with the weekly opening-range taking shape just above the 25% parallel. Initial support rests at the weekly open / May low at 98.65/69 and is backed by the 61.8% retracement of the late-July advance at 98.39. Broader bullish invalidation rests with the 2018 high / 61.8% retracement of the broader July rally at 97.71/86- losses below this threshold would threaten a test of the yearly lows.
Initial resistance is eyed at the 2023 low / 61.8% retracement of the recent decline at 99.58/62 and is backed again by the 2024 low- 2024 low-close at 100.16/35- a breach / close above this threshold is needed to mark uptrend resumption towards subsequent objectives at the May uncovered gap at 100.98 and the 1.618% extension at 101.27. Key resistance is eyed at the Setpmber high-day close (HDC) / high at 101.77/92- look for a larger reaction there IF reached.
Bottom line: The US Dollar 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 (98.31) IF price is heading higher on this stretch with a close above 100.35 needed to fuel the next major leg of the advance.
Keep in mind we are in the early throws of the August opening-range with more significant inflation and retail sales data on tap next week. Stay nimble early in the month 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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