US Dollar Short-term Outlook: USD Bulls March into April

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

• US Dollar surges more than 2% off March low, post-Fed rally testing fresh monthly highs
• USD bulls eye resistance at yearly highs – key US inflation data on tap
• Resistance 104.77-105, 105.63, 105.90-106.10 - Support 103.97-104.01, 103.49, 102.76/99

The US Dollar Index is trading at the monthly highs ahead of key inflation data this week with the bulls now approaching technical resistance at the yearly highs. The battle lines are drawn heading into the close of the month / quarter with PCE data on Friday likely to offer some guidance here. These are the updated targets and invalidation levels that matter on the DXY short-term technical charts.

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US Dollar Price Chart – USD Daily (DXY)

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

Technical Outlook: In last month’s USD Short-term Outlook, we noted that DXY was testing confluent support and that, “rallies should be limited to 104.39 IF price is heading lower on this stretch with a close below 103.49 needed to fuel the next leg in price.” USD broke below the 200-day moving average the following week with the index plunging 1.7% into the March open.

A V-shaped recovery off key technical support has rallied more than 2% off the lows with a breakout of the monthly opening-range highs last week keeping the focus weighted to the topside into the close of the month. That said, the weekly opening-range remains intact ahead of Friday’s inflation data and the immediate focus is on a breakout to offer near-term guidance here.

US Dollar Price Chart – USD 240min (DXY)

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

Notes: A closer look at USD price action shows DXY trading within the confines of an ascending pitchfork extending off the December lows with an embedded channel guiding this most recent advance. While a test of channel resistance early in the week does threaten a pullback into support here, the focus remains higher while within this formation.

Initial support rests with the 61.8% Fibonacci retracement of the February decline / December high-day close (HDC) at 103.97-104 and is backed closely by the 200DMA  (currently ~103.73) and the 2023 yearly open at 103.49- both areas of interest for possible downside exhaustion IF reached. Broader bullish invalidation rests at 102.75/99- a region defined by the 100% extension of the February decline, the November low-day close (LDC), the 2016 high-close (HC) and the 2020 swing high. This remains a critical pivot zone for the greenback.

A topside breach of the weekly open at 104.43 would expose the next major resistance hurdle at 104.77/105- look for a larger reaction there IF reached with a breach / close above needed to mark uptrend resumption towards the 105.63 and key resistance at the upper parallel / 105.90-106.10.

Bottom line: The US Dollar is coming off monthly uptrend resistance and while we could get some pullback here, the outlook remains constructive while within this well-defined technical pattern. From a trading standpoint, losses should be limited to the 200-DMA IF price is heading higher on this stretch with a close above 105 needed to mark resumption of the broader uptrend.

Keep in mind we are heading into the close of the month / quarter with key US inflation data on tap ahead of the extended holiday weekend. Watch the weekly close for guidance here and stay nimble heading into the April open. Review my latest US Dollar Weekly Forecast for a longer-term look at the 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