US Dollar Technical Forecast: USD Plunges into Pivotal Support

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

• US Dollar plunges 2.37% off year high – June opening range takes shape above 52-WMA
• USD testing technical support at December uptrend- NFP, CPI, FOMC on tap
• DXY resistance 104.97/105.07, 106.10/11, 107.18– Support 103.96-104.26 (key), 102.87/99,

The US Dollar remains on the defensive this week with DXY trading into yearly trend support ahead of major event risk over the next week. The focus is on a key pivot zone around the yearly moving average with the broader December rally now at risk. 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 had, “turned from lateral resistance with an outside weekly reversal. 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…” DXY is now off nearly 2.4% from the highs with the index trading into confluent support this week at 52-week moving average / 38.2% retracement of the December rally at 103.96-104.26 – looking for a reaction / possible price inflection here over the next few days.

A break / weekly close below would threaten the yearly uptrend and risk a larger reversal towards key support at 102.87/91- a region define by the 61.8% Fibonacci retracement of the December rally, the 2016 high-close, and the 2023 January low-week close (LWC). We’ll reserve this threshold as our broader bullish invalidation level with a break below needed to shift the border technical focus lower towards the December LWC / 2024 yearly open at 101.33/41.

Initial weekly resistance is eyed at the February high / April outside weekly-reversal close at 104.97-105.07 and is backed by the 2023 / 2024 HWCs at 106.10/11- a breach / close above this threshold is ultimately needed to mark uptrend resumption with subsequent objectives eyed at 107.18 and the Fib confluence at 108.38/97.

Bottom line: The US Dollar index is testing a major support pivot here and threatens the broader December uptrend IF broken. From a trading standpoint, a good zone to reduce portions of short-exposure / lower protective stops – rallies should be limited by the 105-handle IF price is heading lower on this stretch with a close below the yearly moving average needed to fuel the next major move in price.

Keep in mind we get the release of US Non-Farm Payrolls (NFP) on Friday with key inflation data and the Fed interest rate decision on tap next week. Stay nimble into the releases and watch the weekly closes 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 USD Economic Data Releases

Economic Calendar - latest economic developments and upcoming event risk.

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

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