US Dollar Short-term Outlook: USD Cracks Major Support- Downside Risk Mounts
US Dollar plunged to the lowest levels in nearly four-years with the bears in charge. Focus turns to whether losses extend or stabilize at nearby support.
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US Dollar Index Technical Outlook: USD Short-term Trade Levels
- U.S. Dollar breaks January range low- DXY plunges more than 3.9% off monthly high to trade at the lowest levels in nearly four-years
- The recent rebound attempt has stalled below former support, keeping downside pressure intact
- Major event risk into the February open with US ADP & NFPs on tap next week
- DXY Resistance 96.65/85, 97.46 (key), 98.15/23- Support 95.61, 94.97-95.21 (key), 94.62/65
The US Dollar has suffered a decisive breakdown after falling through a key support zone, pushing DXY to its lowest levels since early 2022. The move follows a sharp selloff that has inflicted significant technical damage, with subsequent rebounds failing to reclaim former support. The focus now shifts to whether price can stabilize near upcoming support, and a response here will be critical in determining whether the decline accelerates or pauses into consolidation as the market reassesses positioning. 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 my last US Dollar Short-term Outlook we noted that DXY was trading within a, “well-defined weekly opening-range just below resistance- look for a breakout this week to offer guidance on the near-term directional bias. From a trading standpoint, losses should be limited to 98.23 IF price is heading higher on this stretch with a close above the 200-DMA needed to fuel the next leg of the late-December advance.” The index broke higher two-days later with price registering an intraday high at 99.48 before reversing sharply the following week.
A break below the objective yearly open at 99.23 extended nearly 4% off the monthly high before rebounding ahead of the Fed this week at the 2.618% extension of the monthly decline at 95.61. The recovery has been capped by resistance at the 2025 low close and the 100% extension of the November decline at 96.65/85. The focus is on inflection off this zone in the days ahead with the risk tilted to the downside while below this key pivot zone.
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 a proposed descending pitchfork extending off the monthly high with the 75% parallel further highlighting near-term resistance at 96.65/85. Ultimately, a breach / close above the Friday close at 97.45 would be needed to fill the Sunday gap and suggest that a more significant low is in place. Broader bearish invalidation is now lowered to the January opening-range low (ORL) / yearly open at 98.15/23. Strength surpassing this threshold would be needed to put the bulls back on the offensive.
Initial support rests at 95.61 and is backed by the 94.98-95.21- a region defined by the 1.618% extension of the November decline and the 100% extension of the broader 2022 decline. Note that the median-line converges on this threshold next week. Subsequent support objectives rest with the March 2020 low and the 2022 low at 94.63/65.
Bottom line: A break below the January opening-range has plunged to the lowest levels since February of 2022 with DXY trading at the 2025 lows ahead of the monthly close. Significant technical damage has been done this week, and the focus is on a potential reaction towards more meaningful support just lower. From a trading standpoint, rallies should be limited to 97.45 IF price is heading lower on this stretch with a close below 95.60 needed to fuel the next leg of the decline. Look for a larger reaction near the 95-handle IF reached.
Keep in mind we are heading into the close of the month tomorrow with the ADP and Non-Farm Payrolls reports on tap next week. Stay nimble into the monthly cross and watch the weekly closes for guidance here. Review my latest US Dollar Weekly Forecast for a closer look at the longer-term DXY technical trade levels.
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Active Short-term Technical Charts
- Canadian Dollar Outlook: USD/CAD Plunge Halted- Bulls Try to Regain Control
- Swiss Franc Short-term Outlook: USD/CHF Rally Nears Make-or-Break Resistance
- British Pound Short-term Outlook: GBP/USD Breaks December Uptrend- Support now the Battleground
- Euro Short-term Outlook: EUR/USD Trapped in Downtrend- Breakout Risk Brewing
Written by Michael Boutros, Senior Technical Strategist
Follow Michael on X @MBForex
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