US Dollar Forecast: USD Battle Lines Drawn at Major Pivot Zone

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

• US Dollar up 2.17% month-to-date – poised for fourth consecutive weekly rally
• USD rally testing key pivot zone at yearly moving average– risk for price inflection
• DXY resistance 102.99-103.49, 104.63/77, 107.18– Support ~102, 101.08/24, 98.97-99.66 (key)

The US Dollar is poised for a fourth consecutive weekly-advance with DXY rallying nearly 3.2% off the December lows. The index is now testing a critical pivot zone and the focus is on possible price inflection up here in the days ahead. These are the updated targets and invalidation levels that matter on the DXY weekly technical chart heading into the close January.

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US Dollar Price Chart – USD Weekly (DXY)

Chart Prepared by Michael Boutros, Sr. Technical Strategist; DXY on TradingView

Technical Outlook: In last month’s US Dollar Technical Forecast we noted that DXY was, “breaking a major support confluence here. From at trading standpoint, rallies should be capped by 103.50 IF price is heading lower on this stretch...” The Dollar plunged into the close of the year with a rebound off technical support into the January-open once again testing this key pivot zone.

The 102.99-103.49 zone is defined by the 2016 high close (HC), the January low-week close (LWC), the 52-week moving average, and the objective 2023 yearly-open. The immediate focus is on possible price inflection off this zone with a breach / weekly-close above the July pitchfork (blue) needed to suggest a more significant low was registered last month.

Subsequent resistance objectives eyed at the March high-week close / 61.8% Fibonacci retracement of the October decline at 104.63/77 and the 2023 high-week close (HWC) at 106.10- look for a larger reaction there IF reached.

Initial weekly support rests at 102 backed by a more significant technical confluence at the July low-reversal close / 78.6% retracement at 101.08/24- weakness below this threshold would threaten resumption of the October sell-off towards critical support at 98.97-99.66.

Bottom line: The US Dollar has rallied into confluent resistance at former support and is challenging the yearly moving average- 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 the 102-handle IF price is heading higher on this stretch with a close above July slope needed to keep the immediate advance viable.

Keep in mind we get the release of key US inflation data tomorrow with the Core Personal Consumption Expenditure (PCE) expected – watch the weekly close 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 with FOREX.com

Follow Michael on X @MBForex