US Dollar Short-term Outlook: USD Set to Snap 7-Day Slide Before NFP
US Dollar plunged through critical support last week with the index hitting three-year lows ahead of NFPs. Battle lines drawn on the DXY short-term technical charts.
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US Dollar Index Technical Outlook: USD Short-term Trade Levels
- US Dollar plunges nearly 5.5% off May high- breaks through key support
- USD rebound off trend support in focus ahead of Non-Farm Payrolls tomorrow
- DXY Resistance 97.71-98.39, 99.41/58 (key), 100.35- Support 96, 94.63/98 (key), 93.93
The US Dollar Index is poised to snap a seven-day losing streak with DXY rebounding off trend support into the start of the month. A break below a major pivot zone last week keeps the technical outlook weighted to the downside with the immediate focus on this near-term recovery. Battles lines drawn on the DXY short-term technical charts heading into NFPs tomorrow.
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 last month’s US Dollar Short-term Outlook we noted that DXY was, “testing critical support at the yearly lows with the weekly opening-range intact... The immediate focus is on a breakout of this range with the broader short bias vulnerable while above the yearly low. From a trading standpoint, rallies would need to be limited to 99.57 IF price is heading lower on this stretch with a close below 97.71 needed to fuel the next major leg of the decline.” The index registered an intraday high at 99.42 last week before marking an outside-weekly reversal with a break below key support extending more than 3% off the monthly high.
A seven-day decline takes DXY into channel support with the index rebounding ahead of tomorrow’s highly anticipated U.S. employment report. The risk rises for a larger recovery within the multi-month downtrend with the broader technical outlook still tilted to the downside while within this formation.
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 carving the weekly range just above channel support with today’s recovery approaching the objective weekly open at 97.19. Resistance now stands at former support around 97.71-98.39- a region defined by the 2018 swing high, the April lows, and the 61.8% retracement of the broader 2018 advance. Rallies should be limited to this key pivot zone IF price is heading lower on this stretch. Ultimately, a breach / close above the June open / 2023 swing low at 99.40/57 (bearish invalidation) would be needed to suggest a more significant low is in place / a larger reversal is underway.
Look for initial support near the 96-handle with the next major technical consideration seen at 94.63-98- a region defined by the March 2020 swing low, the 2022 low, and the 100% extension of the 2022 decline. Subsequent support seen at the 78.6% retracement of the 2018 advance at 93.93. Both these levels represent areas of interest for possible downside exhaustion / price inflection IF reached.
Bottom line: The U.S. Dollar broke below a major pivot-zone last month with the most recent decline rebounding off downtrend support yesterday. From a trading standpoint, rallies should be limited to 98.39 IF price is heading lower on this stretch with a close below 96-needed to fuel the next leg of the decline.
Keep in mind we are in the early throws of the July opening-range with U.S. Non-Farm Payrolls on tap tomorrow ahead of the holiday weekend. 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.
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Written by Michael Boutros, Sr Technical Strategist with FOREX.com
Follow Michael on X @MBForex
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