US Dollar Short-term Outlook: USD Bulls Try to Reassert Control

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

U.S. Dollar attempting to regain control after last month’s breakout, DXY stabilizing above key short-term support
Near-term risk remains higher while above the weekly low- key inflation data on tap Friday
DXY Resistance 99.39/40, 99.85, 100.16/35- Support 98.68/69, 98.39/45 (key). 97.71.82

The U.S. Dollar is showing signs of renewed strength, with USD price action building on last month’s breakout. The immediate focus is on a breakout of the weekly range, with the risk weighted to the topside while above the weekly low. Traders will be closely watching Friday’s CPI release and next week’s FOMC rate decision for guidance on whether this recovery is set to continue. Battle lines drawn on the USD short-term technical charts.

Review my latest Weekly Strategy Webinar for an in-depth breakdown of this US Dollar technical setup and more. Join live on Monday’s at 8:30am EST.

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, “recovery is approaching key technical resistance near the September highs with the October opening-range taking shape just below. From a trading standpoint, losses should be limited to 97.71 IF price is heading higher on this stretch with a daily close above 98.94 needed to fuel the next major leg of the advance.” The index broke higher later that week with the advance extending more than 2.1% off the October low. The rally exhausted into Fibonacci resistance days later before pulling back with DXY rebounding late-last week just ahead of the monthly open. The focus is on this recovery with the near-term outlook weighted to the topside while above the weekly low.

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 trading within the confines of an ascending pitchfork extending off the yearly low. Initial support rests at the May low / August high-day close (HDC) at 98.68/69 with near-term bullish invalidation now raised to the weekly low / 61.8% retracement of the recent advance at 98.39/45. Losses below this threshold would threaten a lager correction towards the 2018 high / October open at 97.71/82 and the 61.8% retracement of the September advance / October low at 97.46/49. Both levels of interest for possible downside exhaustion / price inflection IF reached.

Initial resistance is eyed with the 78.6% retracement of the August decline / October HDC at 99.39/40 and is backed by the 100% extension of the September advance at 99.85. Key resistance is eyed at 100.16/35- a region defined by the 2024 low, the August high, and the 2024 low-close. A topside breach / daily close above this pivot zone is needed to suggest a more significant low is in place / a larger trend reversal is underway. Subsequent resistance eyed with the 200-day moving average, currently near ~100.83.

Bottom line: The US Dollar is threatening a larger recovery after last month’s breakout, and the near-term risk is higher while above the weekly low. From a trading standpoint, losses should be limited to 98.39 If price is heading higher on this stretch with a close above 99.40 needed to fuel the next leg of the advance.

Keep in mind we get the release of key U.S. inflation data this week with the September Consumer Price Index (CPI) on tap Friday ahead of next week’s highly anticipated Fed interest rate decision. Stay nimble into the release 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.

Key US Economic Data Releases

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Written by Michael Boutros, Sr Technical Strategist with FOREX.com

Follow Michael on X @MBForex

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