US Dollar Technical Forecast: DXY Breakout Failure Threatens the Yearly Uptrend
The U.S. Dollar's post-FOMC reversal has returned the index to a pivotal support zone that could determine the broader trend heading into August.
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US Dollar Index Technical Forecast: USD Weekly Trade Levels (DXY)
- DXY has reversed sharply after failing to break multi-year downtrend resistance.
- The index is testing a pivotal support zone that could determine the broader August outlook.
- A sustained break below current support would increase the risk of a deeper correction within the yearly uptrend.
- Reclaiming the July highs would shift the focus back toward a renewed breakout attempt.
- Next week's ISM surveys, ADP employment report, and Non-Farm Payrolls could provide the next major catalyst.
- Resistance 101.92/98 (key), 102.72, 103 - Support 100.16/42, 99.41, 98.95 (key)
The U.S. Dollar has turned sharply lower after failing to break multi-year downtrend resistance, shifting the technical focus to a pivotal inflection zone we have been tracking since last year. The current pullback is unfolding within the broader yearly uptrend, but the market is now threatening a decisive break that could expose trend support lower into August. With key U.S. economic data on deck next week, traders are watching closely to determine whether this week's decline proves to be a healthy correction or the beginning of a more meaningful reversal. 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, “responding to resistance at the upper bounds of longer-term bearish structure, and the focus is on a reaction off this zone early in the month.” The July opening range took shape just below the June high with the index breaking lower this week on the heels of the FOMC rate decision. The decline takes USD into a critical inflection zone we have been tracking since last year at 100.16/42- a region defined by the 2024 swing low, the 2025 July & November swing highs, and the 2024 low-week close (LWC). Note that a parallel extending off last year’s low converges on this threshold this week and a weekly close below this zone would suggest a more significant correction is underway within the yearly uptrend.
Subsequent support objectives rest with the 38.2% retracement of the yearly range at 99.41 backed by the 52-week moving average, currently near ~98.95. The February channel line converges on this slope over the next few weeks and losses below this slope would be needed to invalidate the yearly uptrend and would threaten resumption of the broader 2022 downtrend.
Weekly resistance remains at the May 2025 & September 2024 highs at 101.92/98. Strength beyond this threshold would validate a breakout of the multi-year downtrend and fuel the next leg of the USD rally towards the 100% extension of the January rally at 102.72 and the 2016 high-close / 2020 swing high at 103- look for a larger reaction there IF reached.
Bottom line: The U.S. Dollar failed to break out of multi-year downtrend resistance this month and the index is vulnerable to further losses within the 2026 uptrend heading into August. From a trading standpoint, losses would need to be limited to the 52-week moving average for the yearly uptrend to remain viable with a weekly close back above 100.42 needed to fuel another run at the highs. Ultimately, a break above 101.98 is needed to mark resumption to fresh highs.
Next week we get the release of key US economic data with ISM services & manufacturing PMI, ADP private sector employment, and the Non-Farm Payrolls report on tap. Stay nimble into the monthly cross and watch the weekly closes for guidance here. 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
Follow Michael on X @MBForex
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