US Dollar Short-term Outlook: USD Bulls Face the Fed

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

US Dollar Index nine-week rally testing major resistance zone into yearly highs
USD bulls vulnerable into Fed rate decision– broader outlook remains constructive
DXY Resistance 105.38/63 (key), 105.88, 106.57- Support 104.53, 104.23, 103.47/49

The US Dollar Index surged nearly 5.9% off the yearly lows with a stunning nine-week rally taking DXY into technical resistance at the 2023 opening-range highs. The stage is set heading into today’s highly anticipated FOMC interest rate decision as a multi-month uptrend hangs in the balance. These are the updated targets and invalidation levels that matter on the USD short-term technical charts into the Fed.

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 – DXY Daily

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

Technical Outlook: In last month’s US Dollar Short-term Outlook, we noted that a dive-day rally had taken USD into, “confluent resistance at the yearly downtrend. From a trading standpoint, a good zone to reduce portions of long-exposure / raise protective stops – losses should be limited to July channel support IF price is heading higher on this stretch with a close above the July highs needed to mark resumption of the medium-term uptrend.” It was a messy breakout into the close of the month, but the index held support with the rally now extending into key resistance at the 2023 opening-range highs- FOMC on tap.

The resistance zone in focus is 105.38/63- a region defined by the 38.2% Fibonacci retracement of the 2022 decline, the January high and the March high-day close. Note that USD has been marking continued momentum divergence into these highs and suggests the immediate advance may be vulnerable here- watch today’s close.

US Dollar Index Price Chart – DXY 240min

Chart Prepared b/y Michael Boutros, Sr. Technical Strategist; DXY on TradingView

Notes: A closer look at USD price action shows DXY carving the weekly opening-range just below the 105.38/63 resistance zone. Initial support is eyed at the lower parallel / 78.6% retracement of the yearly range at 104.53 and is backed closely by the May high-day close at 104.23- a break / daily close below this threshold would threaten a larger correction towards subsequent support objectives at 103.47/49 and broader bullish invalidation at 102.90/99.

Ultimately, topside breach / close above the March / yearly high at 105.88 is needed to mark resumption of the July rally with subsequent resistance objectives eyed at 106.57 and 107.17/20- look for a larger reaction there IF reached.

Bottom line: The US Dollar rally is trading into resistance at the yearly high on building momentum divergence with the FOMC interest rate decision on tap. From a trading standpoint, the threat remains for a deeper pullback within the broader July advance – losses should be limited to 104.22 IF price is heading higher on this stretch. Ultimately, a setback here may offer more favorable entries with a close above 105.88 needed to clear the way for the next leg higher in price. Review my latest US Dollar Weekly Technical Forecast for a longer-term look at the DXY trade levels.

Key US Economic Data Releases

Economic Calendar - latest economic developments and upcoming event risk.

Active Short-term Technical Charts

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

Follow Michael on Twitter @MBForex

The information on this web site is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement. The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.

Futures, Options on Futures, Foreign Exchange and other leveraged products involves significant risk of loss and is not suitable for all investors. Losses can exceed your deposits. Increasing leverage increases risk. Spot Gold and Silver contracts are not subject to regulation under the U.S. Commodity Exchange Act. Contracts for Difference (CFDs) are not available for US residents. Before deciding to trade forex, commodity futures, or digital assets, you should carefully consider your financial objectives, level of experience and risk appetite. Any opinions, news, research, analyses, prices or other information contained herein is intended as general information about the subject matter covered and is provided with the understanding that we do not provide any investment, legal, or tax advice. You should consult with appropriate counsel or other advisors on all investment, legal, or tax matters. References to FOREX.com or GAIN Capital refer to StoneX Group Inc. and its subsidiaries. Please read Characteristics and Risks of Standardized Options.

FOREX.com is a registered FCM and RFED with the CFTC and member of the National Futures Association (NFA # 0339826). Forex trading involves significant risk of loss and is not suitable for all investors. Full Disclosures and Risk Warning. Increased leverage increases risk.

GAIN Capital Group LLC (dba FOREX.com) 30 Independence Blvd, Suite 300 (3rd floor), Warren, NJ 07059, USA. GAIN Capital Group LLC is a wholly-owned subsidiary of StoneX Group Inc.