US Dollar Technical Forecast: DXY Bulls Target Yearly Highs After Hot CPI

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

• The U.S. Dollar has rallied 1.3% from the November low, with DXY attempting to extend a third consecutive weekly advance.
• Weekly RSI has reached its highest level since January 2025, although developing bearish divergence warns that the recovery may be vulnerable.
• Bulls are approaching a major resistance confluence, with a decisive weekly close above this threshold needed to fuel the next leg of the broader advance.
• Initial support remains well-defined, with a break below the yearly pitchfork median line needed to suggest a more significant high is in place.
• Stronger-than-expected U.S. inflation has reinforced expectations for further Fed tightening, with PPI and Fed commentary keeping event risk elevated into the weekly close.
• Resistance 102.86/99 (key), 103.82, 104.59/81- Support 101.46, 100.99, 100.16/42

The U.S. Dollar has regained its footing following last month's sharp reversal, with buyers defending the broader ascending structure that has guided price action throughout the year. The subsequent recovery has brought DXY back toward a pivotal technical barrier where longer-term trend resistance converges with several major price levels. Despite the resilience of the broader advance, the latest push higher has yet to establish a decisive breakout, leaving the index vulnerable to another rejection as it approaches this critical inflection zone. The focus now shifts to whether bulls can sustain a move beyond this threshold and reinforce the uptrend heading into mid-November. Battle lines 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 had rallied more than 4% off the August low and that, “From a trading standpoint, losses would need to be limited to 101.02 IF price is heading higher on this stretch with a close above 102 needed to fuel the next major leg of the rally.” The index marked a weekly close at 102.23 three days later with rally extending to a fresh yearly high the following week near 103. An outside-week reversal off resistance declined nearly 1.8% before exhausting last week just ahead of the median-line with DXY now attempting to mark a third consecutive weekly advance. Note that while weekly momentum has reached its highest level since January 2025, bearish divergence signals growing vulnerability in the near-term advance.

The 61.8% parallel of the yearly pitchfork is now in view with lateral resistance eyed just higher at 102.86/99. This region is defined by the 50% retracement of the 2025 decline, the yearly high, the 2016 high close (HC) and the 2020 swing high. A breach / weekly close above this pivot zone is needed to fuel the next leg of the rally. Subsequent resistance objectives are eyed at the 2017 high at 103.82 and 61.8% retracement / 100% extension of the yearly advance at 104.59/81. Both levels of interest of possible topside exhaustion / price inflection IF reached.

Initial support rests with the July high close (HC) at 101.46 and is backed closely by the 100% extension of the October decline at 100.99. Note that the median line converges on this threshold over the next few weeks and a break / weekly close below would be needed to suggest a more significant high is in place, and a larger reversal is underway. The next major technical consideration rests with the 2024 low / low-week close (LWC) at 100.16/42.

Bottom line: The U.S. Dollar has rallied 1.3% off the monthly low with bulls attempting to clear the yearly close high. From a trading standpoint, losses would need to be limited to 101.46 IF the index is heading higher on this stretch with a close above 103 needed to fuel the next major leg of the advance.

USD event risk remains elevated into the weekly close after today’s stronger-than-expected October CPI report. Headline prices rose 0.4% month over month versus expectations for 0.3%, while core CPI increased 0.3%, exceeding forecasts for 0.2%. Markets are now fully pricing a December rate hike and assigning an 88% probability to another 25-basis-point increase by March. Attention turns to Thursday’s jobless claims and Friday’s PPI report, alongside further Fed commentary; another firm inflation reading or hawkish policy signal would keep the dollar supported into the weekly close. Stay nimble into the release and watch the weekly close 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

Follow Michael on X @MBForex