US Dollar Short-term Outlook: USD Bears Slow at Fresh Yearly Low

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

• US Dollar plunges 3.2% since the start of August- marks five-week decline
• USD approaching downtrend support- US CPI on tap into monthly close
• Resistance 100.82-101.01, 101.41, 102.80s- Support 100.60, 99.95, 99.66

The US Dollar Index has plunged nearly 5.3% off the June highs with DXY attempting to snap a five-week losing streak. The greenback has fallen seven of the past eight-weeks with a break to fresh yearly lows now approaching downtrend support. Battles lines drawn on the DXY short-term technical charts.

Review my latest Weekly Strategy Webinar for an in-depth breakdown of this US Dollar technical setup and more. Join live on Monday’s at 8:30am EST.

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 had, “responded to confluent downtrend support and the focus is on this near-term recovery. From a trading standpoint, the focus is on possible topside exhaustion / price inflection into 103.49/67.” The index briefly registered an intraday high at a 103.54 the following day before turning lower with the Dollar plunging more than 2.9% off those highs.

The decline rebounded broke & closed below confluent support last week at 100.82-101.01- a region defined by the February 2023 swing low and the April 2023 low-close. Note that the 25% parallel of the descending pitchfork we’ve been racking off the May / June high also converges on this threshold and keeps the short-bias viable while below- looking for inflection off this zone.

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 an embedded descending channel formation with the weekly opening-range taking shape just below resistance (former support) at 100.82-101.01. Weekly-open support rests at 100.60 with a break lower exposing subsequent objectives at the 2023 low-day close (LDC) at 99.95 at the 2019 high at 99.66- both levels of interest for possible downside exhaustion / price inflection IF reached. A break / close below the lower parallels is needed to fuel the next major leg in price towards the 61.8% Fibonacci retracement of the 2021 rally at 98.97.

A pivot back above 101 would alleviate downside pressure in the near-term with initial resistance eyed at the objective yearly-open at 101.41 and the highlighted slope confluence near 101.80. A topside breach / close above the January LDC at 102.20 is ultimately needed to suggest a more significant low was registered and shift the focus back towards the 103 and the upper parallels.

Bottom line: The US Dollar broke below a major support pivot last week and the onus is on the bears to hold this position- watch for a break of the weekly opening-range for guidance here. From a trading standpoint, look to reduce short-exposure / lower protective stops on a stretch towards 100- rallies should be limited to the 101.80 IF price is heading for a test of downtrend support.

Keep in mind we get the releases of key US inflation data (July PCE) on Friday into the close of the month. Stay nimble into the releases and watch the weekly close. 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