US Dollar Short-term Outlook: USD Defends Support at Fresh Yearly Low

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

• US Dollar attempts to snap three-week losing streak- defends major trend support
• USD monthly / weekly opening-ranges intact- Core PCE tomorrow, NFPs next week
• Resistance 101.23/41, 101.73/77 (key), 102.62- Support 100.21 (key), 99.96, 99.59

The US Dollar Index defended major trend support at the yearly lows yesterday with DXY attempting to snap a three-week losing streak. The focus remains on a breakout of the monthly opening-range with the broader short-bias still vulnerable while above the weekly low. Battles lines drawn on the DXY short-term technical charts heading into the monthly cross.

US Dollar Index Price Chart – USD Daily

Chart Prepared by Michael Boutros, Sr. Technical Strategist; DXY on TradingView

Technical Outlook: In my last USD Short-term Outlook, we noted that DXY had, “rebounded off confluent downtrend support and threatens a larger bear-market correction in the days ahead. The immediate focus is on a breakout of the weekly / monthly opening-ranges for guidance.” It’s been more than two-weeks and the September range remains intact despite an attempted break lower on Tuesday.

Note that pitchfork support has continued to govern the downside here and this range remains a crucial slope-pivot for the Dollar. The immediate focus is on a breakout of the weekly opening-range for guidance with the short-bias vulnerable while above this slope.

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 the index trading within an embedded descending pitchfork with the index straddling the median-line for the past two-weeks. Initial resistance is eyed at the objective weekly high / 2024 yearly open at 101.23/41 and is backed by the September-open / high-close (HC) at 101.73/77. Ultimately a breach above the upper parallel just higher would be needed to invalidate the June downtrend / suggest a more significant low was registered yesterday.

Support now rests with the monthly low at 100.21- a break / close below this slope would likely fuel a bout of accelerated losses for the greenback with initial objectives eyed at the 2023 low-day close (LDC) at 99.96 and that yearly low at 99.59- look for a larger reaction there IF reached. The next major Fibonacci consideration is eyed at the 61.8% retracement of the 2021 advance at 98.98.

Bottom line: The US Dollar Index has been trading into downtrend support for over a month now and the focus remains on a breakout of the September range for guidance. While a reversal candle off slope support yesterday does threaten a larger near-term recovery here, the broader technical outlook remains weighted to the downside while below the monthly-open. Form a trading standpoint, rallies should be limited to 101.77 IF price is heading lower with a close below 100.21 needed to fuel the next major move.

Note that we get the release of key US inflation data tomorrow with the August Core Personal Consumption Expenditure (PCE) on tap. Watch the weekly close here for guidance and stay nimble into the monthly cross- the next major event risk is slated for Friday with Non-Farm Payrolls next week likely to fuel further volatility here.

Key US Economic Data Releases

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Written by Michael Boutros, Sr Technical Strategist

Follow Michael on X @MBForex