US Dollar Short-term Outlook: USD Support Test Risks March Breakdown

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

• US Dollar reversal off uptrend resistance now testing uptrend support
• USD Index risk for downside exhaustion / price inflection into 200-DMA
• DXY Resistance 104.09, 104.39, 104.77-105 - Support 103.74, 103.49, 102.76/99

The US Dollar Index is up just 0.25% in February despite a monthly trading range of more than 2%. A reversal off uptrend resistance is now testing support at the January uptrend and the battle lines are drawn heading into the March open. 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 my last USD Short-term Outlook, we noted that DXY had, “rallied nearly 4% off the December lows with the advance now testing confluent uptrend resistance- risk for near-term exhaustion into this technical hurdle… losses should be limited to 103.49 IF price is heading higher on this stretch with a close above 104.77 needed to fuel the next major move.”

The index did mark a daily close at 104.85 the following week before collapsing with DXY plunging more than 1.4% off the highs. An intraday low was registered last week at 103.43 with the Dollar now trading just above slope support / the 200-day moving average ahead of the monthly close.

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 a proposed descending pitchfork formation extending off the highs. An attempt to breach the 75% parallel failed yesterday with price now testing multi-week uptrend support- the immediate focus is on a reaction here.

Initial support here at the 61.8% Fibonacci retracement of the recent rally / 200-DMA at 103.71/74 with the 2023 yearly-open just lower at 103.49- a break / daily close below this threshold is needed to suggest a more significant reversal is underway towards key support at 102.76/99- a region defined by the November low-day close (LDC), the 2016 high-close (HC), and the 2020 swing high.

Initial resistance is eyed at the December HDC at 104.09 with near-term bearish invalidation at the 61.8% retracement near 104.39. Ultimately, a breach / daily close above key resistance at 104.77-105 is needed to mark uptrend resumption towards the January 2023 high / March high-day close at 105.63.       

Bottom line: The US Dollar is testing confluent uptrend support here- the immediate focus is on a reaction off this mark. From at trading standpoint, a good zone to reduce portions of short-exposure / lower protective stops – 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. Stay nimble here into the March opening-range with US Non-Farm Payrolls next week likely to fuel some volatility. 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

Follow Michael on X @MBForex