US Dollar Technical Forecast: USD Bulls Eye US CPI

US Dollar Index Technical Forecast: USD Weekly Trade Levels (DXY)

• US Dollar rally exhausts into key resistance at yearly highs- lower for second week
• USD outlook constructive within yearly uptrend- US Consumer Price Index (CPI) on tap
• DXY resistance 104.63/77 (key), 106.10, 107.18/34– Support ~103.57, 102.33/99, 101.33

The US Dollar is lower for the second consecutive week with DXY struggling just below major technical resistance at the yearly highs. The battle lines are drawn ahead of key US inflation data tomorrow as the bulls look to defend the yearly uptrend. These are the updated targets and invalidation levels that matter on the DXY weekly technical chart heading into CPI.

Review my latest Weekly Strategy Webinar for an in-depth breakdown of this USD setup and more. Join live on Monday’s at 8:30am EST.

US Dollar Price Chart – USD Weekly (DXY)

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

Technical Outlook: In last month’s US Dollar Technical Forecast we noted that USD had, “rebounded off confluent uptrend support and from a technical standpoint, keeps the outlook constructive while above 102.75. From a trading standpoint, look to reduce long-exposure / raise protective stops on stretch towards 104.77- losses should be limited to channel support IF price is heading higher here with a close above the yearly opening-range highs needed to fuel the next leg.”

The Dollar surged into the March close / April open with the index briefly registering an intraweek high at 105.10 before exhausting. While an outside weekly-reversal off resistance does threaten further kickback, the medium-term technical outlook remains constructive while within this formation.

Initial support rests with the 52-week moving average (currently ~103.57) and is backed by a critical confluence zone at 102.33-99 – a region defined by the 61.8% Fibonacci retracement of the December advance, the 2023 & 2024 January low-week closes (LWC) and the 2016 high-close (HC). A break / weekly close below this threshold would be needed to invalidate the yearly uptrend with broader bullish invalidation steady at the December low-week close at 101.33.

Key resistance remains unchanged at the March high-week close (HWC) / 61.8% retracement of the October decline at 104.63/77 – a breach / weekly close above this threshold is needed to mark uptrend resumption towards the 2023 HWC at 106.10 and the 2023 highs / 50% retracement at 107.18/34- look for a larger reaction there IF reached.

Bottom line: The US Dollar exhausted into technical resistance at the yearly opening-range highs last week- risk for some pullback here but be on the lookout for a possible exhaustion low in the weeks ahead. From a trading standpoint, losses should be limited to 103 IF price is heading higher on this stretch with a close above 104.77 still needed to fuel the next leg in price.

Keep in mind we get the release of key inflation data tomorrow with US CPI on tap. Market participants are anticipating a 0.2% increase in the headline read to 3.4% y/y with Core inflation seen ticking down to 3.7%. Stay nimble into the release and watch the weekly close here for guidance. I’ll publish an updated US Dollar Short-term Outlook once we get further clarity on the near-term DXY technical trade levels.

Key Economic Data Releases

Economic Calendar - latest economic developments and upcoming event risk.

Active Weekly Technical Charts

• British Pound (GBP/USD)
• Euro (EUR/USD)
• Gold (XAU/USD)
• Australian Dollar (AUD/USD)
• Canadian Dollar (USD/CAD)
• Crude Oil (WTI)
• S&P 500, Nasdaq, Dow

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

Follow Michael on X @MBForex