US Dollar Short-term Outlook: USD Rejected at Resistance- Key Test Ahead

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

• U.S. Dollar reverses sharply off key technical resistance into November open
• End of government shutdown offers little solace as DXY threatens September uptrend
• Risk is for deeper setback with key support in view- Flurry of Fed speak on tap
• DXY Resistance 99.62, 99.75, 100.16/35 (key)- Support 99.14, 98.68/78 (key), 98.03

The US Dollar reversed sharply off pivotal resistance into the November open with DXY poised to mark a second consecutive weekly loss. The focus is now on whether the pullback marks the start of a larger correction or a brief pause within the broader uptrend. Battle lines drawn on the USD short-term technical charts.

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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 last month’s US Dollar Short-term Outlook we noted that the DXY was approaching the October highs and that, “From a trading standpoint, losses would need to be limited to 98.56 IF price is heading higher on this stretch – look to reduce portions of long-exposure / raise protective stops on a rally towards the upper parallels with a breach above 100.35 needed to suggest a larger trend reversal is underway.” The index pushed higher in the days that followed, with DXY briefly hitting an intraday high of 100.36 before reversing sharply into November. The Dollar has now fallen more than 1.2% off the monthly high with the decline attempting to break below the September uptrend   today- watch the close with respect to the 23.6% retracement at 99.38 for guidance here.

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 breaking below the ascending pitchfork extending off the yearly low with a simple channel extending off the monthly high guiding this decline. Initial support rests with the 10/22 swing high at 99.14 and is backed by 99.68/78- a region defined by the August high-day close, the May low and the 38.2% retracement. Look for a larger reaction there IF reached with a break / close below needed to suggest a more significant high is in place and a larger trend reversal is underway. Subsequent support rests at 98.03 and the 2018 high / 61.8% retracement at 97.71/80.

Weekly open resistance is eyed at 99.62 and is backed closely by the November open at 99.75. A break / close above this threshold would threaten resumption of the September uptrend with key resistance steady at 100.15/35- a region defined by the 2024 low, the 200-day moving average and the 2024 low close. Strength beyond this pivot zone is needed to fuel the next major leg of the US Dollar advance. The next major technical consideration is eyed at the 1.618% extension of the September advance at 101.32.

 

Bottom line: DXY reversed from key resistance into the monthly open with a break below then September upslope threatening a deeper setback- be on the lookout for a possible exhaustion low in the days ahead. From a trading standpoint, losses would need to be limited to 98.68 IF this is a simple correction with a break above 100.35 needed to mark uptrend resumption.

Keep in mind that the economic docket remains light this week with, yet another key inflation read (CPI) delayed on account of the government shutdown. Although the government has now officially reopened, it will take time for key data releases to catch up after such a prolonged pause. In the meantime, a continued flurry of Fed speakers are scheduled over the next few days, and traders will look for insight into how policymakers view the rate path into year-end after weeks of limited data. Stay nimble until the monthly range clears and watch the weekly closes for guidance. Review my latest US Dollar Weekly Forecast for a closer look at the longer-term DXY technical trade levels. 

Key US Economic Data Releases

Economic Calendar - latest economic developments and upcoming event risk.

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Written by Michael Boutros, Sr Technical Strategist

Follow Michael on X @MBForex