US Dollar Price Forecast: USD Eight-Week Rally Eyes 2023 High

US Dollar Index Technical Forecast: DXY Weekly Trade Levels

• US Dollar breakout of 2023 downtrend now approaching yearly
• USD eight-week rally remains constructive above 103- US inflation / FOMC on tap
• DXY resistance 104.63, 105.39/67 (key), 107.18 – Support 103.49, 102.99 (key), 101.08

The US Dollar surged 5.6% off the July / yearly low with an eight-week rally in DXY breaching the yearly downtrend in USD. The breakout is attempting to mount the yearly moving average this week with major resistance seen just higher. The battle lines are drawn as the bulls face key US inflation data and the FOMC rate decision over the next two-weeks. These are the updated targets and invalidation levels that matter on the DXY weekly technical chart.

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US Dollar Price Chart – DXY Weekly

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 had, “rallied from yearly downtrend support with the recovery approaching downtrend resistance. The August opening-range remains intact, and the break should offer some guidance here. From a trading standpoint, look for reduce portions of long-exposure / raise protective stops on a stretch towards the yearly open – losses should be limited to 101.08 IF price is going to attempt a breakout here.”

The USD ripped through yearly open resistance at 103.49 two weeks later with the index now poised to close an eighth-consecutive weekly advance. The closest historical reference to such an advance was a twelve-week rally in September of 2014 – in that instance, price relented for just two-weeks (pullback of 2.62%) before resumption to fresh multi-year highs.

The rally pushed through confluent resistance this week at the 52-week moving average / 2023 high-week close at 104.63 – watch today’s close with respect to this level. Key resistance is eyed just higher at 105.39/67- a region defined by the 38.2% Fibonacci retracement of the 2022 decline and the August low-week close. Note that a breach / close above this threshold would constitute a breakout of the yearly opening-range and keep the focus on a stretch towards 107.18.

Initial weekly support now back at 103.49 and is backed closely by the 2016 high-close / January low-week close at 102.99- we’ll reserve this threshold as our medium-term bullish invalidation zone. Losses below this threshold could fuel a much steeper correction towards the July reversal close at 101.08.

 Bottom line: The US Dollar rally is maturing here, and the bulls may be vulnerable into key resistance just higher. From a trading standpoint, look to reduce long-exposure / raise protective stops on a stretch towards 105.39/67- losses should be limited to the 103-handle IF price is heading higher with a breach of the yearly opening-range needed to fuel the next leg price.

Keep in mind we get the release of key inflation data next week with the highly anticipated FOMC interest rate decision looming- expect some volatility here. I’ll publish an updated US Dollar Short-term Outlook once we get further clarity on the near-term DXY technical trade levels.

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

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