US Dollar Short-term Technical Outlook: USD Bulls Emerge

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

• US Dollar Index rebounds off confluent support- snaps three-week losing streak
• USD December opening-range taking shape- NFP, Fed rate decision on tap
• DXY Resistance 104.33, 105, 105.48/63- Support 103.35/56, 102.95/99 (key), 102.55

The US Dollar Index rallied nearly 1.6% off the November lows with a pivot back above the 200-day moving average threatening a larger recovery. The rally off technical support is now approaching initial resistance and the focus is on a breakout of the December opening-range for 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 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, broken below a multi-month uptrend and that, “rallies should be limited to the monthly open for the November downtrend to remain viable with a close sub-105 needed to fuel the next leg lower. Ultimately, a larger setback here may offer more favorable opportunities closer to rend support.” The rebound failed well-ahead of the monthly open (106) just two-days later before breaking sharply lower. A decline of more than 3.3% rebounded off confluent Fibonacci support into the close of November with DXY snapping a three-week losing streak. Is a more significant low in placed for the Dollar?

The recovery has extended into the December-open with EUR/USD closing back above the 200-day moving average yesterday. We look to the monthly opening-range for guidance here with the immediate focus on this recovery off uptrend support.

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 breaching channel resistance early in the week with the index trading within the confines of an ascending pitchfork extending off the November lows. Initial resistance is eyed at the 75% parallel / 38.2% retracement of the October decline at 104.33- look for a reaction there IF reached with a close above needed to keep the focus on 105. Key resistance now adjusted to 105.48/63- a region defined by the 61.8% retracement, the January high, and the March high-day close.

A cluster of support rests between the December-open, the 2023 yearly-open, and the 200DMA at 103.35/56. This zone is backed by near-term bullish invalidation at the 2016 high-close / 2020 high at 102.95/99- an area of interest for possible downside exhaustion / price inflection IF reached. Ultimately, a close below the 61.8% retracement at 102.55 would be needed to mark downtrend resumption.

Bottom line: The US Dollar has 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. Keep in mind we have US Non-Farm Payrolls (NFP) on tap Friday with the Fed interest rate decision slated for next week- stay nimble here and look to the monthly opening-range breakout for further guidance in the days ahead. 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