US Dollar Price Forecast: USD Twelve-Week Rally Stretched

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

• US Dollar breakout of 2023 opening-range now testing confluent uptrend resistance
• USD twelve-week analog suggests rally may be vulnerable near-term- US NFP / CPI on tap
• DXY resistance 107.18, 108.09, 108.97 – Support 105.39/67, ~104.18, 103.00/49

The US Dollar has now rallied nearly 7.8% off the July / yearly low with a stunning twelve-week rally in DXY now testing confluent uptrend resistance. The battle lines are drawn heading into Q4 as a breakout of the 2023 opening-range faces the first major technical hurdle. These are the updated targets and invalidation levels that matter on the DXY weekly technical chart.

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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 an eight-week rally in DXY was approaching a major resistance hurdle and to be on the lookout for a reaction 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.” A topside breach into the close of September tested confluent uptrend resistance yesterday at 107.18 before pulling back- risk for near-term exhaustion here.

Note that a rally this week would mark the twelfth-consecutive weekly advance. The closest analog 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.

A newly identified ascending pitchfork formation highlights support back at 105.39/67 with medium-term bullish invalidation now raised to the median-line / 52-week moving average near ~104.17. Ultimately the broader trade remains constructive while above 103.00/49- a region defined by the 2016 high-close, the January low-week close, and the objective yearly open.

A topside breach / weekly close above 107.18 would be needed to mark resumption towards the 2001 low at 108.09 and the 61.8% Fibonacci retracement of the 2022 decline at 108.97- an area of interest for possible topside exhaustion / price inflection IF reached.

Bottom line: The US Dollar rally has extended into confluent uptrend resistance this week and while the broader outlook remains weighted to the topside, the immediate advance may be vulnerable here below 107. From a trading standpoint, losses should be limited to 105.39 IF price is heading higher on this stretch with a topside breach needed to fuel the next major leg higher in the greenback.

Keep in mind we get the release of US Non-Farm Payrolls on Friday with key inflation data on tap next week- stay nimble here as we carve out the monthly opening-range and watch the weekly close. 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 Twitter @MBForex