US Dollar Short-term Outlook: USD Bulls Relent at Resistance

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

• US Dollar set to snap three-day winning streak– only second daily-loss this month
• USD turn from resistance now approaching trend support- risk for exhaustion / price inflection into monthly close
• Resistance 104.85/87(key), 105.63, 106.10- Support 103.74/85, 103.42/49, 102.95/99 (key)

The US Dollar Index turned from uptrend resistance yesterday with DXY set to snap a three-day winning streak. Although the outlook remains constructive, the advance may be vulnerable into the close of the month with the immediate focus on a reaction into support just lower. Battles lines drawn on the DXY short-term technical charts into the close of October.

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 was, “testing uptrend resistance here on the heels of a 3% rally off fresh yearly lows- looking for a reaction up here. From a trading standpoint, a good zone to reduce portions of long-exposure / raise protective stops- losses should be limited to 101.77 IF price is heading higher here with a close above 103 needed to fuel the next leg.”

The index ripped higher two-days later with USD rallying nearly 4.4% off the yearly lows. The advance was halted yesterday at uptrend resistance and the focus is on this pullback into the close o the month with initial support now in view.

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 an ascending pitchfork extending off the September low with the upper parallel catching the highs yesterday. Initial support is now within striking distance at 103.74/85- a region defined by the July low-day close (LDC), the 200-day moving average, and the 61.8% retracement of the June decline. Looking for a reaction there IF reached with subsequent support eyed at the weekly range low / 2023 yearly open at 103.42/49 and the median-line. Ultimately, a break / close below the 2016 high-close / 2020 high at 102.95/99 would be needed to suggest a more significant high is in place / a larger trend reversal is underway.

Look for initial resistance along the upper parallel with a breach / daily close above the July high-week close (HWC) / 78.6% retracement at 104.85/87 needed to fuel the next major leg of the advance. Subsequent resistance objectives eyed at the May high-day close (HDC) at 105.63 and the 2023 HWC at 106.10- look for a larger reaction there IF reached.

Bottom line: The US Dollar has responded to uptrend resistance and threatens a larger pullback within the broader October advance. From a trading standpoint, losses would need to be limited to the median-line IF price is heading higher on this stretch with a close above 104.87 needed to mark uptrend resumption.

Keep in mind we get the release of key US inflation data next week with US Non-Farm Payrolls on tap Friday. Stay nimble into the monthly cross and watch the weekly closes for guidance here. Review my latest US Dollar Weekly Forecast for a look at the longer-term DXY technical trade levels. 

Key US Economic Data Releases

Economic Calendar - latest economic developments and upcoming event risk.

Active Short-term Technical Charts

• Australian Dollar Short-term Outlook: AUD/USD Bears Charge 6600
• Canadian Dollar Short-term Outlook: USD/CAD at Resistance- BoC on Tap
• Gold Short-term Outlook: XAU/USD October Range Breakout Imminent
• Euro Short-term Technical Outlook: EUR/USD Bears Halted at Support
• British Pound Short-term Outlook: GBP/USD Support Test at September Low

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

Follow Michael on X @MBForex