US Dollar Technical Forecast: USD Bulls Face the Fed - Breakout Looms

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

• US Dollar rebounds nearly 3.5% off yearly lows- stalls at major pivot zone
• USD October range contracts ahead of the FOMC- breakout imminent
• Markets fully priced for a 25bps cut- Fed forward guidance drive volatility
• DXY Resistance 99.59/67, 100.16/42 (key), 101.55- Support 97.50/65 (key), 96.94, 96.38

The US Dollar is coiling just below resistance, with DXY trading within a contractionary range ahead of tomorrow’s FOMC rate decision. With markets fully priced for a rate cut this week, traders will be closely eyeing the Fed’s forward guidance, and the focus is on a breakout to determine whether a larger recovery or renewed weakness will take hold into November. Battlelines drawn on the DXY weekly technical chart.

Review my latest episode of the Opening Bell 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 my last US Dollar Technical Forecast we noted that DXY had, “defended multi-year downtrend support last month with the index nearly marking a monthly Doji in September… From a trading standpoint, losses would need to be limited to 96.94 IF the index is indeed heading higher on this stretch with a close above 98.71 needed to fuel a larger recovery in the Dollar.” The index rallied nearly 3.5% off the yearly lows before stalling, with price consolidate within the first weekly range of October heading into the highly anticipated FOMC rate decision tomorrow. The focus is on a breakout of this range to drive the next directional move as we head into the close of the month.

Weekly support rests with the 61.8% retracement of the mid-September rally / 2025 low-week close (LWC) at 97.50/65. A break / weekly close below this threshold would threaten downtrend resumption toward the 2021 high at 96.94 and the June low at 96.37 – both areas of interest for possible downside exhaustion / price inflection IF reached. The next major technical consideration rests 94.65/97- a key pivot-zone defined by the March 2020 swing low, the 78.6% retracement of the 2021 advance, and the 100% extension of the 2023 decline. Look for a larger reaction there IF reached.

Weekly resistance is eyed at the 2023 low / 209 high / April low-week close (LWC) at 99.59/67 with bearish invalidation just higher at the 2024 low / LWC at 100.16/42- a breach / weekly close above this threshold is needed to suggest a more significant low is in place / a larger trend reversal is underway. Subsequent resistance objectives eyed at the 38.2% retracement of the yearly range at 101.55 and the 52-week moving average at 101.98.

 

Bottom line: The U.S. Dollar is coiled just below resistance, and the focus is on a breakout of the 97.50-99.66 range for guidance heading into the close of the month. From a trading standpoint, losses should be limited to 97.50 IF the Dollar is higher on this stretch with a breach above 100.41 needed to validate a more significant breakout in price.

Keep in mind markets are fully priced for a 25bps cut tomorrow and the focus will be on expectations for the December rate decision and whether the central bank will be ending QT (quantitative tightening). As it stands, markets are pricing an 88% chance the Fed will cut another 25bps into the close of the year. Stay nimble into the release & subsequent presser with Powell and watch the weekly / monthly close for guidance here. Review my latest US Dollar Short-term Outlook for a closer look at the near-term DXY technical trade levels.

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--- Written by Michael Boutros, Sr Technical Strategist

Follow Michael on X @MBForex