US Dollar Short-term Outlook: USD Bulls Eye Breakout at Resistance
US Dollar Index Technical Outlook: USD Short-term Trade Levels
- US Dollar rebound extends more than 2.2% off yearly low on the heels of US CPI
- USD bulls testing breakout of March trendline- PPI, retail sales on tap
- DXY Resistance 98.39, 99.41/58, 100.35 (key)- Support 97.71/96, 96.78 (key), 96
The US Dollar Index is poised to mark a fourth consecutive daily advance with DXY up nearly 0.7% from the Sunday open. The immediate focus is on today’s close as the bulls attempt to overtake a major pivot zone in price. Battles lines drawn on the DXY 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 my last US Dollar Short-term Outlook we noted that DXY broke, “below a major pivot-zone last month with the most recent decline rebounding off downtrend support yesterday. From a trading standpoint, rallies should be limited to 98.39 IF price is heading lower on this stretch…” The index rallied more than 2.2% off those lows with DXY testing the 98.39 barrier today on the heels of the U.S. CPI- watch the close. Note that a proposed pitchfork extending off the yearly lows further highlights this resistance zone today and we’re looking for possible inflection off this mark in the days ahead.
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 embedded channel formation extending off the yearly low with the upper parallel further highlighting range resistance near 98.39. 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.
Weekly open support rests at 97.95 and is backed closely by the 2018 high at 97.71. A break / close below the objective monthly open at 96.78 would invalidate the proposed uptrend / mark resumption of the broader downtrend with subsequent support seen at the 96 handle and 94.63/98.
Bottom line: The U.S. Dollar recovery is now testing resistance at former support and threatens the multi-month downtrend in DXY. From a trading standpoint, a good zone to reduce portions of long-exposure / raise protective stops- pullbacks should be limited to 97.71 IF the index is heading for a breakout on this stretch with a close above channel resistance (red) needed to fuel the next leg higher in price.
Keep in mind we get the release of U.S. produce prices tomorrow with June retail sales on tap Thursday. Stay nimble into the releases and watch the weekly close 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
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