US Dollar Technical Forecast: USD Rally Falters at Key Resistance

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

• US Dollar rallies more than 2% off June low– set to snap four-week winning streak
• USD advance rejected at technical resistance - NFPs, July opening-range on tap
• DXY resistance 106.10/11, 107.18, 108.38/97– Support 104.95, 104.20/26 (key), 102.87/99,

The US Dollar is set to snap a four-week winning streak with the DXY faltering at technical resistance into the start of the month. Although the broader USD outlook is still constructive, the threat for a deeper correction remains while below the yearly high-close and we’re on the lookout for a possible exhaustion low in the weeks ahead. 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 DXY was, “trading into confluent support this week at the 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.” The index turned higher two-days later with USD surging more than 2% off the June lows. The rally faltered at key resistance into the close of the month at the 2023 / 2024 high-week closes (HWC) at 106.10/11- the focus is on possible inflection off this threshold with the long-bias vulnerable while below.

Initial weekly support rests with the June low-week reversal close at 104.95 backed by key support again at the 52-week moving average / 38.2% retracement, now 104.21/26- losses should be limited to this threshold for the January uptrend to remain viable. Broader, bullish invalidation steady at 102.87/99- 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).

A topside breach / weekly close above 106.10 would be needed to mark uptrend resumption with subsequent objectives eyed at the 50% retracement of the 2022 decline / 2023 highs at 107.18/34 and key resistance at the 100% extension of the 2023 advance / 61.8% retracement at 108.38/97- look for a larger reaction there IF reached.

Bottom line: The US Dollar index has been testing lateral resistance for the past two-weeks with the broader advance vulnerable into the start of the month while below. From a trading standpoint, losses should be limited to the 52-week moving average IF price is heading higher on this stretch with a close above 106.11 needed to fuel the next leg in price.

Keep in mind we are in the early throws of the July opening-range with the Non-Farm Payrolls on tap on Friday amid thin holiday trading. Stay nimble into the release and watch the weekly closes for guidance here. I’ll publish an updated US Dollar Short-term Outlook  once we get further clarity on the near-term DXY technical trade levels.

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

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