US Dollar Short-term Outlook: USD Poised for Breakout Ahead of Fed

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

• US Dollar rallies more than 1.3% off September low / confluent support
• USD monthly / weekly opening-range breakouts imminent- Fed on tap next week
• Resistance 101.73, 102.20, ,102.80/99(key)- Support 101.18, 100.61/82(key), 99.95

The US Dollar Index rebounded off technical support into the close of August with the September opening-range now set just above. While the broader outlook remains weighted to the downside, the broader decline may be vulnerable near-term and we’re looking for a breakout to offer guidance heading into next week’s Fed rate decision. Battles lines drawn 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 DXY had broken, “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.” Those lows held with a breakout just days later fueling a rally of more than 1.3% into the monthly cross.

A quick test of the lows / key support again last week has been defended with the September opening-range taking shape just above – looking for the breakout to offer guidance here with the broader April downtrend vulnerable while above the December low / February 2023 lows at 100.61/82.

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 ascending pitchfork formation extending off the recent lows. Note that the weekly opening-range is now set just above the weekly open at 101.18. Ultimately, a break / daily close below 100.61 is needed to mark downtrend resumption with subsequent support objective eyed at the 2023 low-day close (LDC) and 99.95 and the 2019 high at 99.66.

Monthly-open resistance is eyed at 101.73 with a breach of the weekly opening-range highs needed to fuel the next leg higher towards the January LDC at 102.20 and critical resistance at 102.80/99 – a region defined by the 38.2% Fibonacci retracement of the April decline, the 2016 high-close (HC) and the 2020 swing high. (both regions of interest for possible topside exhaustion / price inflection IF reached).

Bottom line: The US Dollar Index has rebounded off confluent downtrend support and threatens a larger bear-market correction in the days ahead. The immediate focus is on a breakout of the weekly / monthly opening-ranges for guidance. From a trading standpoint, pullbacks should be limited to t the weekly open IF price is heading higher on this stretch with a close above the median-line needed to fuel the next leg in price.

Keep in mind the highly anticipated FOMC interest rate decision is on tap next week with market participants widely expecting a 25bps cut from Powell & Co. Stay nimble into the release and watch the weekly close here for guidance. Review my latest US Dollar Weekly Forecast for a look at the longer-term DXY technical trade levels. 

Key US Economic Data Releases

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

Follow Michael on X @MBForex