US Dollar Short-term Outlook: USD Bulls Eye Major Resistance

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

• US Dollar surges into February open- highest levels since mid-November
• USD Index approaching confluent uptrend resistance- risk for exhaustion / price inflection
• DXY Resistance 104.63/77 (key), 105.63, 105.90- Support 103.98, 103.49/60, 102.76/99

The US Dollar Index rallied more than 3.1% since the start of the year with DXY stretching into fresh multi-month highs this week. The advance takes USD into a key pivot-zone we’ve been tracking for weeks now, and while the broader outlook remains constructive, the immediate focus is on a breakout of the weekly opening-range with the bulls vulnerable while below uptrend resistance. These are the updated targets and invalidation levels that matter on the DXY short-term technical charts.

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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 multi-week rally off support in the US Dollar takes the index into key technical resistance here – immediate focus is on possible risk for price inflection.” The region in focus was, “at 103.35/49 – a region defined by the December open, the 200-day moving average, and the 2023 yearly open.” The index spent nearly three-weeks there before finally breaking with a massive outside-day reversal off confluent support on February 2 marking the largest single-day advance since July 27^th.

The advance failed just ahead of confluent resistance this week at the March high-week close / 61.8% Fibonacci retracement of the October decline at 104.63/77- note that a measured objective of the December / January inverse head-and-shoulders formation also comes in at 104.63. Risk for possible topside exhaustion / price inflection into this threshold in the days ahead.

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 DXY continuing to trade within the confines of an ascending channel formation with the upper parallel catching the highs on Monday. The weekly opening-range is preserved (103.96-104.60) as of Thursday and the immediate focus is on the breakout for guidance with the late-December rally vulnerable sub-104.77.

Initial support rests with the December high-day close (HDC) at 103.98 backed by near-term bullish invalidation at 103.49/60. Key support remains steady at 102.76/99 – a region defined by the November low-day close (LDC), the 2016 high-close (HC) and the 2020 swing high. A break / daily close below this threshold would ultimately be needed to suggest a more significant reversal is underway.

A topside breach above this key confluence zone could spark another accelerated rally with subsequent resistance objectives eyed around the 2023 January high / March high-day close (HDC) at 105.63 and the 78.6% retracement at 105.90- look for a larger reaction there IF reached.

Bottom line: The US Dollar has rallied nearly 4% off the December lows with the advance now testing confluent uptrend resistance- risk for near-term exhaustion into this technical hurdle. Look for a breakout of the weekly opening-range for immediate guidance. From a trading standpoint, a good zone to reduce portions of long-exposure / raise protective stops- losses should be limited to 103.49 IF price is heading higher on this stretch with a close above 104.77 needed to fuel the next major move. Review my latest US Dollar Weekly Technical Forecast for a longer-term look at the DXY trade levels. 

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

Follow Michael on X @MBForex