US Dollar Technical Forecast: USD Slides Back to Yearly Support

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

US Dollar set to snaps two-week winning streak- DXY reverses at technical resistance
USD plunge takes index back into multi-year trend support- risk for price inflection into August- Fed U.S. Core PCE on tap
DXY Resistance 98.39/52 (key), 99.59/67, 100.98- Support 96.94, 96.38 9 (key), 94.65/98

The US Dollar is poised to mark the largest weekly decline in over a month with DXY reversing off technical resistance. The decline takes the index back towards multi-year downtrend support and the focus is on possible infection into the monthly cross. Battle lines drawn on the DXY weekly technical charts heading into August with the Fed, PCE and NFPs on tap.

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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, “above pivotal support at the yearly lows into close of the month- risk for price inflection off this mark. From a trading standpoint, a good zone to reduce portions of short-exposure / lower protective stops- the immediate focus is on a breakout of the 97.69-99.67 range for guidance with the broader decline vulnerable while above median-line support.” The Dollar broke below support later that week with DXY registering fresh yearly lows in the following days.

A two-week recovery extended more nearly 2.7% off the low before exhausting into technical resistance last week at 98.39/52- a region defined by the 61.8% retracement of the broader 2018 advance and the 38.2% retracement of the May decline. The immediate focus is on this reversal with DXY already down nearly 1.7% from recent high.

The bears are now approaching initial weekly support at the 2021 swing high / 2025 low-week close at 96.94/99. Note that the yearly low at 96.38 converges on the median-line over the next few weeks and a break / weekly close below is needed to fuel the next major leg of the decline. Subsequent support seen at the March 2020 low / 100% extension of the 2022 decline at 94.65/98- look for a larger reaction there IF reached.

A breakout above the monthly range highs would suggest a more significant low was registered last month / a larger correction is underway with subsequent resistance objectives eyed at the 99.58/67 and the May high-week close (HWC) at 100.98.

Bottom line: The U.S. Dollar is once again approaching downtrend support near the yearly lows- risk for price inflection on test of the median-line. From a trading standpoint, the short-bias remains vulnerable while above the median- rallies should be limited to the weekly high IF price is heading lower on this stretch with a close below 96.38 needed to fuel the next major leg of the decline.

Keep in mind the FOMC interest rate decision is on tap next week with the Core Personal Consumption Expenditure (PCE) and Non-Farm Payrolls slated into the monthly cross. Stay nimble into the releases 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, Sr Technical Strategist

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