US Dollar Short-term Outlook: USD Rally at Make-or-Break Resistance

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

US Dollar rips into 2024- rally extends 2.7% off December lows
USD Index now approaching technical resistance- risk for exhaustion / price inflection
DXY Resistance 103.35/49, 104.26, 104.77- Support 102.95/99, 102.43/54 (key), 101.74

The US Dollar Index surged into the 2024 open with DXY rallying nearly 1.8% month-to-date. The advance is now testing the first major resistance hurdle at a key technical confluence, and we are on the lookout for possible reaction here in the days ahead. 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 US Dollar Short-term Outlook, we noted that DXY had, “rebounded off confluent support / broken out of short-term downtrend resistance. From at trading standpoint, look to reduce long-exposure / raise protective stops on a stretch towards 104.33- losses should be limited to 102.95 IF price is heading higher on this stretch.” The index registered a high at 104.26 days later before reversing sharply lower with a break below 102.95 fueling a 3.5% decline off the December highs into the close of the year.

The Dollar rebounded off confluent support near the February lows at 100.82 with the subsequent rally now extending more than 2.7% off the lows. The focus is on confluent resistance just higher at 103.35/49 – a region defined by the December open, the 200-day moving average, and the 2023 yearly open. Looking for possible price inflection here with a daily close above needed to keep the monthly advance viable.

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 trading within the confines of an ascending channel extending off the December lows. Initial support rests back at the 2016 high-close (HC) / 2020 high at 102.95/99 with near-term bullish invalidation now raised to the weekly-open / 61.8% Fibonacci retracement of the 2023 trading range at 102.43/54. A break close below this threshold would threaten a deeper setback for the greenback with such a scenario exposing the August lows at 101.74 and the objective 2024 yearly-open (also the monthly opening-range lows) at 101.37.

A topside breach / close above this key pivot zone is needed to keep the immediate long-bias in play towards subsequent resistance objectives at the December high (104.26) and the 61.8% retracement of the October decline at 104.77- look for a more significant reaction there IF reached.

Bottom line: A multi-week rally off support in the US Dollar takes the index into key technical resistance here – risk for price inflection. From a trading standpoint, a good zone to reduce portions of long-exposure / raise protective stops- losses should be limited to the weekly-open IF price is heading higher on this stretch. 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

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