US Dollar Technical Forecast: USD Bulls on Guard at Support

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

• US Dollar marks outside-weekly reversal off resistance post-Fed – largest decline since March
• USD threat for deeper pullback within yearly uptrend- bulls searching support
• DXY resistance 106.10, 107.18, 108.38/97 (key)– Support 104.63/77, ~103.90s, 102.87/99

The US Dollar is virtually unchanged into the start of the week with DXY trading just above support after last week’s Fed induced reversal. The immediate focus is on a breakout to of last week’s range for guidance with the risk for a deeper bull-market correction while below the 106-handle. These are the updated targets and invalidation levels that matter on the DXY weekly technical chart.

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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 was testing a major resistance pivot and that, “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.” The index registered a low at 103.88 that week before reversing sharply higher with the breakout exhausting into channel resistance the following week. Price failed to close above lateral resistance at the 2023 high-week close (HWC) at 106.10 with an outside-week reversal post-Fed taking the Dollar back into support at former resistance. The focus is on this key pivot zone in the weeks ahead.

A break / close below the March HWC / 61.8% Fibonacci retracement of October decline at 104.63/77 would threaten a test of key support / medium-term bullish invalidation at the 52-week moving average / December trendline near ~103.90- an area of interest for possible downside exhaustion / price inflection IF reached. Ultimately a close below 102.87/99 would be needed to suggest a more significant high was registered last month and threaten a test of longer-term uptrend support near the 2023 December low-week close (LWC) at 101.33.

Initial weekly resistance remains unchanged at 106.10. A breach / weekly close above this threshold is needed to mark uptrend resumption towards subsequent objectives at 107.18 and key resistance at 108.38/97- a region defined by the 100% extension of the 2023 advance and the 61.8% retracement of the 2022 decline. Note that this zone also converges on both medium-term and longer-term slope resistance and further highlights its technical significance over the next few months- look for a larger reaction there IF reached.

Bottom line: The US Dollar index turned from lateral resistance with an outside weekly reversal last week. The threat remains for a deeper pullback within the yearly uptrend. That said, we are on the lookout for an exhaustion low in the weeks ahead. From a trading standpoint, losses should be limited to the yearly moving average IF price is heading higher on this stretch with a close above 106.10 needed fuel the next leg towards key resistance.

Despite limited US data prints this week, there is a slew of Fed speakers on tap which may fuel some volatility in the USD crosses. Ultimately, we are looking for a breakout of the May opening-range here- stay nimble early in the month and watch the weekly close for guidance. Review my latest US Dollar Short-term Outlook for a closer look at the near-term DXY technical trade levels.

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

Follow Michael on X @MBForex