US Dollar Short-term Outlook: USD Bulls Rest After Five-Week Run

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

• US Dollar marks five-week rally- responds to uptrend resistance in yearly open
• USD weekly / monthly opening-range breakouts imminent- NFPs on tap Friday
• Resistance 108.92/97 (key), 109.53, 110- Support 107.93-108.06, 106.96, 105.95-106.1 (key)

The US Dollar Index is poised to snap a five-week winning streak after turning from resistance at fresh-yearly highs last week. The pullback takes price into uptrend support and the focus is on a breakout of the weekly opening-range for guidance- NFPs on tap. 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 a rebound into the December open put the focus on a breakout of the monthly opening range and that, “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.”

The index registered an intraday low at 1.0542 just two-days later before mounting a five-week rally of nearly 4% into the January open. The advance faltered into the median-line last week with a pullback of more than 1.6% rebounding off confluent support today at 107.93-108.06- a region defined by the 100% extension of the 2023 advance and the July 2022 high-week close (HWC). The weekly / monthly opening-ranges are set just above confluent uptrend support, and the focus is on a breakout in the days ahead for guidance.

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 plunging into support early in the week with DXY trading into the yearly open today at 108.53. Resistance is eyed with the objective weekly open / 61.8% retracement of the 2022 decline at 108.92/97- a topside breach / close above this threshold would be needed to mark resumption of the broader uptrend towards the swing high at 109.53 and the upper parallels (currently ~110 & 110.50s).

A break / close below this support pivot would threaten a larger correction in the greenback with initial support seen at the 2023 high-day close at 106.96 and the 38.2% retracement / 2023 HWC at 105.95-106.10- look for a larger reaction there IF reached. Losses below this threshold would suggest a more significant high was registered last week / a larger reversal is underway.

Bottom line: The US Dollar has carved the weekly opening range just above confluent support with the late-September uptrend vulnerable into the yearly open- the immediate focus us is on a breakout here. From a trading standpoint, losses would need to be limited to the weekly low IF price is heading higher on this stretch with a close above 109 needed to fuel the next leg of the advance.

Keep in mind we have US Non-Farm Payrolls (NFP) 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 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