US Dollar Technical Forecast: USD Poised for Breakout Ahead of High-Stakes Fed Decision

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

US Dollar rally drops into confluent support- December opening-range taking shape ahead of a major policy catalyst
USD is coiling within a narrowing structure, and a breakout from this zone will be critical in determining the next directional leg.
Fed decision on tap tomorrow- focus on updated SEP as trader’s asses monetary policy outlook
DXY Resistance 100.16/42 (key), 101.20/55, 103- Support 98.99-99.08, 97.65/80 (key), 96.94

The US Dollar is coiling just above confluent support, with the monthly opening-range taking shape as traders brace for Wednesday’s highly anticipated Federal Reserve rate decision. The broader structure remains constructive while above this threshold, but momentum has compressed into a narrowing formation that now threatens a larger breakout. Whether price breaks higher or lower from this zone will define the next leg of the move, making the reaction into the Fed especially critical. With volatility expected to surge, traders should stay nimble as the Dollar approaches this key technical inflection point. Battle lines drawn on the DXY weekly technical chart.

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

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, “carved the November opening-range just below resistance- look for a breakout in the days ahead of guidance. From a trading standpoint, losses should be limited to 99 IF price is heading for a breakout on this stretch with a close above 100.42 needed to mark resumption of the September uptrend.” The range broke lower into the December open with the index plunging 1.6% before rebounding off Fibonacci support to register a weekly close-low last week at 98.99. The focus now shifts to the Fed rate decision tomorrow with the monthly opening-range taking shape just above support- decision time for the US Dollar.

Initial weekly support rests with the 38.2% retracement of the advance off the yearly low at 98.80. A break / weekly close below this threshold would threaten another bout of accelerated losses with the next major technical consideration seen at the 2025 low-week close (LWC) and the 61.8% retracement at 97.65/81- look for a larger reaction there IF reached. Subsequent support rests with the 2021 swing high at 96.94 and the 2025 swing low at 96.22.

Key resistance remains unchanged at the 100.15/42- a region defined by the 2024 swing low, the November high-week close, the July high, and the 2024 LWC. A topside breach / weekly close above this threshold is needed to mark resumption of the September uptrend with subsequent resistance objectives eyed at the 52-week moving average (currently ~101.20) and the 38.2% retracement of the yearly range at 101.55.

Bottom line: The U.S. Dollar is trading just above confluent support with the monthly opening-range in focus heading into major event risk. Look for the breakout to offer guidance in the days ahead. From a trading standpoint, losses would need to be limited to 98.80 for the September uptrend to remain viable with a weekly close above 100.42 ultimately needed to fuel the next leg of the advance.

Keep in mind the FOMC interest rate decision is on tap tomorrow. The focus will be on the Fed’s updated Summary of Economic Projections, and the interest rate dot-plot will be critical as investors adjust the outlook for monetary policy heading into 2026. As of now, Fed Fund Futures are nearly fully priced for a cut tomorrow (89%) with the next rate cut expected in April. Stay nimble into the release and watch the weekly closes here for guidance. Review my latest US Dollar Short-term Outlook for a closer look at the near-term DXY technical trade levels.

Key USD Economic Data Releases

Economic Calendar - latest economic developments and upcoming event risk.

Active Weekly Technical Charts

--- Written by Michael Boutros, Senior Technical Strategist

Follow Michael on X @MBForex

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