US Dollar technical forecast: USD major support test ahead of Fed

US Dollar Index technical forecast: DXY weekly trade levels

US Dollar Index attempting to mark fourth-consecutive daily decline ahead of Fed
USD testing key pivot zone- risk for possible price inflection / downside exhaustion
DXY resistance 104.63, 105.73-106.15, 108.09– support 102.75/99, 101.63 (key), 100

The US Dollar Index is off by more than 0.7% this week with DXY attempting to mark a fourth consecutive daily decline ahead of tomorrow’s highly anticipated FOMC interest rate decision. The sell-off is now testing the first major support barrier and the battle lines are well-defined heading into the Fed. These are the updated targets and invalidation levels that matter on the DXY weekly technical chart.

Discuss this USD setup and more in the Weekly Strategy Webinars on Monday’s at 8:30am EST.

US Dollar Index Price Chart – DXY Weekly

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

Technical Outlook: In last month’s US Dollar Index technical forecast we noted that the rally in DXY may be vulnerable heading into a critical resistance zone, “ at 105.73-106.15 – a region defined by the 100% extension of the monthly advance, the December / January swing highs and the 38.2% Fibonacci retracement of the September decline.” The index registered an intraweek high at 105.88 before reversing sharply with a decline of more than 2.7% now approaching the first major inflection zone.

Key support rests at 102.75/99 – a region defined by the 61.8% Fibonacci retracement of the yearly range, the 2016 high-close, the 2020 high and the 2023 low-week close. (Note that two equal legs off the highs would stretch into 102.66). A break / weekly close below this threshold would expose broader uptrend support around the May 2022 low-close at 101.63- look for a larger reaction there IF reached.

Weekly resistance is eyed at the yearly high-week close at 104.64 with a breach / close above 106.15 still needed to suggest a more significant reversal is underway / resumption of the broader uptrend.

Bottom line: The US Dollar sell-off is approaching key support targets ahead of the FOMC rate decision tomorrow- watch the weekly close here. From a trading standpoint, a good zone to reduce portions of short-exposure / lower protective stops – rallies should be limited by 104.64 IF price is heading lower on this stretch. 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

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

Follow Michael on Twitter @MBForex

The information on this web site is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement. The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.

Futures, Options on Futures, Foreign Exchange and other leveraged products involves significant risk of loss and is not suitable for all investors. Losses can exceed your deposits. Increasing leverage increases risk. Spot Gold and Silver contracts are not subject to regulation under the U.S. Commodity Exchange Act. Contracts for Difference (CFDs) are not available for US residents. Before deciding to trade forex, commodity futures, or digital assets, you should carefully consider your financial objectives, level of experience and risk appetite. Any opinions, news, research, analyses, prices or other information contained herein is intended as general information about the subject matter covered and is provided with the understanding that we do not provide any investment, legal, or tax advice. You should consult with appropriate counsel or other advisors on all investment, legal, or tax matters. References to FOREX.com or GAIN Capital refer to StoneX Group Inc. and its subsidiaries. Please read Characteristics and Risks of Standardized Options.

FOREX.com is a registered FCM and RFED with the CFTC and member of the National Futures Association (NFA # 0339826). Forex trading involves significant risk of loss and is not suitable for all investors. Full Disclosures and Risk Warning. Increased leverage increases risk.

GAIN Capital Group LLC (dba FOREX.com) 30 Independence Blvd, Suite 300 (3rd floor), Warren, NJ 07059, USA. GAIN Capital Group LLC is a wholly-owned subsidiary of StoneX Group Inc.