US Dollar Technical Forecast: USD Breakout Faces Its Biggest Test Yet

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

• The US Dollar has rallied more than 4% from the May low after breaking above key resistance.
• The advance is now stalling at long-term downtrend resistance, raising the risk of price inflection.
• A sustained break higher would strengthen the bullish outlook towards major upside objectives while failure could trigger a pullback within multi-month uptrend.
• Softer U.S. jobs data has cooled rate-hike expectations and may limit near-term USD upside. ISM data / FOMC minutes on tap next week.
• Resistance 101.14/21, 101.98 (key), 102.72/99- Support 100.16/42, 99.49 (key), 98.74

The US Dollar breakout is facing its biggest test yet after a sharp rally from the May lows carried DXY into long-term downtrend resistance. The advance has strengthened the broader technical outlook, but price is beginning to stall at a major inflection zone as softer-than-expected U.S. jobs data trims expectations for near-term Fed tightening. With the July opening range taking shape and FOMC minutes due next week, traders are watching whether the Dollar can force a breakout or if resistance triggers a deeper pullback. 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 was, “trading into pivotal resistance for a third consecutive week with the monthly opening-range taking shape just below. From a trading standpoint, losses should be limited to the 52-week moving average IF price is heading higher on this stretch with a weekly close above 99.50 needed to fuel the next leg of this advance.” The index ripped higher the following day with the breakout extending nearly 4.3% from the May low before exhausting last week into longer-term downtrend resistance. The focus is on possible inflection off this slope with the medium-term bullish outlook vulnerable while below.

Initial weekly support now rests with the 2024 low / low-week close (LWC) at 100.16/42 and is backed by the January swing high at 99.49. Note that this level was the origin of the June breakout and losses below this mark would suggest more significant near-term high is in place. Broader bullish invalidation is now raised to the 52-week moving average, which converges on channel support over the next few weeks near ~98.74.

Initial resistance remains with the 38.2% retracement of the 2025 decline and the objective July open at 101.14/22. Although price did register close above this zone last week, the bulls were unable to clear the upper parallel- look for a break of that slope to fuel the next leg of the rally. Subsequent resistance objectives are eyed at the May 2025 swing high at 101.98 and 102.72/99- a region defined by the 100% extension of the January advance, the 2016 high close, and the 2020 swing high. Look for a larger reaction there IF reached- the next major technical consideration does not emerge until the 61.8% retracement near 104.59.

Bottom line: The U.S. Dollar is 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. From a trading standpoint, losses would need to be limited to 99.49 IF price is heading higher on this stretch with breach / weekly close above 101.98 needed to fuel the next major leg of the advance.

The economic calendar is relatively light next week, with the June ISM Services PMI and Wednesday's release of the FOMC meeting minutes headlining the docket. While the minutes are unlikely to alter the broader policy narrative, investors will be looking for additional insight into the Committee's inflation outlook and the internal debate surrounding the future path of monetary policy. Although June Non-Farm Payrolls came in weaker than expected, the unemployment rate remains low at 4.2%, suggesting labor market conditions remain broadly consistent with full employment.

With Chair Warsh reaffirming the Fed's commitment to restoring price stability, inflation expectations remain the primary driver of both interest rate expectations and the U.S. dollar. Fed funds futures modestly pared expectations for near-term tightening following Thursday's employment report, with markets now pricing roughly a 65% probability of a 25-basis-point rate hike by October rather than September. That shift in rate expectations has taken some momentum out of the dollar's recent advance and may limit upside in the near term. Stay nimble here into the July opening range and watch the weekly closes 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