US Dollar Short-term Outlook: USD Bulls Eye Resistance Ahead of NFP

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

• US Dollar reverses off major resistance into December close- marks largest weekly decline since August
• USD testing multi-month trend support- weekly opening-range breakout imminent
• Resistance 106.55, 107.00/13 (key), 107.49- Support 106.10, 105.63/78 (key), 104.87-105.05

The US Dollar Index plunged nearly 2.3% off the yearly high with DXY rebounding off multi-month trend support into the December open. The weekly opening-range is set poised for an imminent breakout and while the broader outlook remains constructive, the immediate advance may be vulnerable here. Battles lines drawn 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 last month’s USD Short-term Outlook, we noted that the DXY rally was extending into initial resistance targets and that, “losses should be limited to 104.87 IF price is heading for another breakout with a close above 106.37 needed to fuel the next leg of the advance.” The Dollar broke higher the following day with the index briefly registering an intraday high 108.07 before exhausting into the close of the month. The focus into the December open is on this recovery off support with the broader uptrend vulnerable early in the month.

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 the confines of a proposed descending pitchfork with the 25% parallel catching the lows last week. Note that the weekly opening-range is taking shape just below the 38.2% retracement of the recent of the decline at 106.55 with more significant resistance eyed at the 2023 high-day close (HDC) / 61.8% retracement at 107.00/13- look for a larger reaction there IF reached. Ultimately, a breach / close above the yearly HDC at 107.49 would be needed to mark uptrend resumption towards 108 and the 61.8% retracement of the 2022 decline at 108.97.

Initial support rests with the 2023 high-week close (HWC) at 106.10 and is backed by the monthly open / May HDC at 105.63/78- a break / close below this threshold would suggest a more significant high was registered last month / a larger correction is underway       with the next major support zone seen at 104.87-105.05- a region defined by the July HWC, the February high, and the 38.2% retracement of the yearly range (area of interest for possible downside exhaustion / price inflection IF reached).

Bottom line: The US Dollar rebounded off multi-month uptrend support into the December open and the immediate focus is on a breakout of the weekly opening-range. The threat for a deeper correction remains while below 107.13. From a trading standpoint, losses would need to be limited to 105.63 for the September uptrend to remain viable with a close above 107.49 needed to mark resumption.

Keep in mind we are in the early throws of the December opening-range with US non-farm payrolls on tap Friday. Stay nimble into the release and watch the weekly close here for guidance. Review my latest US Dollar Weekly Forecast for a look at the longer-term DXY technical trade levels. 

Key USD 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