US Dollar Short-term Outlook: USD Reversal Keeps 2025 Downtrend Intact

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

• US Dollar April rally fails into yearly downtrend- plunges nearly 2.6% off monthly high
• USD near-term rebound vulnerable while below weekly high- U.S. Core inflation data on tap into monthly close
• Resistance 100.35, 100.65 (key), 100.98- Support 99.40/47, 98.79, 97.71-98.39 (key)

The US Dollar Index rallied more than 4% off confluent support with the recovery failing at the yearly downtrend this month. The decline is responding to initial support late in the week with the near-term recovery may be vulnerable as we head into the close of the month. Battles lines drawn for the bulls on the DXY short-term technical charts.

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 the recovery off downtrend support was threatening a larger recovery with key resistance / bearish invalidation at, “the September high / high-day close (HDC) at 101.77/92- look for a larger reaction there IF reached with a breach / close above needed to suggest a more significant low was registered last month / a larger reversal is underway.” The index briefly registered an intraday high at 101.98 the following week before reversing sharply with price breaking below the April uptrend this week. A rebounded off support yesterday remains in focus with the broader risk still weighted to the downside while within the February downtrend.

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 rebounding off support today at 99.40/47- a region defined by the 61.8% retracement of the April rally and the May low-day close (LDC). Initial resistance is eyed at the 38.2% retracement of the recent decline / 2024 low-close at 100.35 with key resistance around the 50% retracement at 100.65- note that the April trendline converges on this threshold over the next few days. Ultimately, a breach above the Friday close / 61.8% retracement at 100.97 is needed to suggest a more significant low was registered last month / validate a breakout of the yearly downtrend.  

A break below the weekly lows would threaten resumption of the broader downtrend towards subsequent objectives seen at the 78.6% retracement at 98.79 and key support at 97.71-98.39- a region defined by the 2018 swing high, the 2025 swing low, and the 61.8% retracement of the 2018 advance. Look for a larger reaction there IF reached.

Bottom line: The U.S. Dollar has broken below a multi-week uptrend with the bulls now attempting to mark resumption of the yearly downtrend. From a trading standpoint, rallies would need to be limited to 100.65 IF the index is heading lower on this stretch with a close below 99.40 needed to fuel the next leg of the decline.

Keep in mind we get the release of key U.S. inflation data next week with core personal consumption expenditures (PCE) on tap into the close of the month. Stay nimble into the release and watch the weekly closes here for guidance. Review my latest US Dollar Weekly Forecast for a closer look at the longer-term DXY technical trade levels. 

Key US Economic Data Releases

 

Economic Calendar - latest economic developments and upcoming event risk.

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Written by Michael Boutros, Sr Technical Strategist with FOREX.com

Follow Michael on X @MBForex