US Dollar Short-term Outlook: USD Rally Reacts to Major Resistance

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By :  ,  Sr. Technical Strategist

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

  • US Dollar rallies into major technical resistance- risk for exhaustion / price inflection
  • USD bulls vulnerable near-term- threat for pullback into yearly uptrend
  • Resistance 105.55/71 (key), 106.37, 106.71- Support 104.62/68, ~104.46, 104.15/26 (key)

The US Dollar Index is responding to confluent resistance at the yearly uptrend with DXY off more than 0.3% since the start of the week. Risk for further exhaustion here within the broader uptrend and we’re on the lookout for a possible exhaustion low in the days ahead. Battles lines drawn on the DXY short-term technical charts into the close of the month.

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 – USD Daily

US Dollar Price Chart  USD Daily  DXY Shortterm Trade Outlook  USD Technical Forecast  6182024

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

Technical Outlook: In last month’s USD Short-term Outlook, we noted that, “The US Dollar is responding to confluent uptrend support with the weekly opening-range taking shape just above- looking for evidence of an exhaustion low here. From at trading standpoint, a good region to reduce short-exposure / lower protective stops – losses should be limited to 104.15 IF the broader uptrend is to remain viable. Ultimately, a close above 105.63 would be needed to mark resumption of the broader uptrend.”

The Index registered an intraday low at 103.99 early in the month but was unable to follow though. Note that the Dollar turned just pips from the 1.382% extension of the ascending pitchfork we’ve been tracking for months now and keeps this slope in focus. Risk for near-term exhaustion here.

US Dollar Index Price Chart – USD 240min  

US Dollar Price Chart  USD 240min  DXY Shortterm Trade Outlook  USD Technical Forecast  6182024

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

Notes: A closer look at USD price action shows DXY turning from confluent resistance this week at 105.55/71- a region defined by the 61.8% Fibonacci retracement of the April decline, the 2023 January high, the March 2023 & May 2024 high-day closes (HDC) and the 100% extension of the June advance. The immediate long-bias is vulnerable while below this key pivot zone and IF the rebound off the monthly low was corrective in nature, this resistance zone would need to hold.

Initial support rests at the 61.8% retracement of the monthly advance / June open at 104.62/68 and is backed closely by the 200-day moving average (currently ~104.46) and bullish invalidation at 104.15/26- losses would need to be limited to this threshold for the December rally to remain viable.  

A topside breach / daily close above 105.71 would be needed to mark uptrend resumption towards subsequent resistance objectives at the 2024 HDC at 106.37 and the 100% extension of the December advance at 106.71- look for a larger reaction there IF reached. The next major resistance zone is eyed just higher at the 2023 HDC / 50% retracement at 107.00/17.

Bottom line: The US Dollar is responding to confluent resistance at multi-week highs- risk for a pullback here but we’re on the lookout for support at the yearly uptrend. From a trading standpoint, losses be limited to the 200-DMA IF price is heading higher on this stretch with a close above 105.71 needed to fuel the next leg in price. Note that losses below 104.15 could see things fall apart rather quickly- tread lightly on a test of this support IF reached.  

Keep in mind we get the release of the next major inflation read next week with the US Core Personal Consumption Expenditure (PCE) on tap Friday. Stay nimble into the release and watch the weekly closes here for guidance. Review my latest US Dollar Weekly Forecast for a look at the longer-term DXY technical trade levels. 

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

Follow Michael on X @MBForex

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