US Dollar Short-term Outlook: USD Bulls Eye July Breakout

US Dollar Index Technical Outlook: DXY Short-term Trade Levels

• US Dollar Index rebounds off uptrend support- bulls eye first resistance hurdle
• USD breakout of 2023 range consolidation pending into July / Q3
• DXY resistance 103, 103.49/63 (key), 104.33- support 102.50s, 102, 101.58

The US Dollar Index rallied more than 1% off the monthly lows with DXY now testing the first resistance hurdle at the June downtrend. The battle-lines are drawn heading into the close of the month / quarter as the yearly range contracts. These are the updated targets and invalidation levels that matter on the DXY short-term technical charts.

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US Dollar Index Price Chart – DXY Daily

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

Technical Outlook: In last month’s US Dollar Short-term Outlook, we noted that DXY was, “now testing downtrend resistance- risk for price inflection here. From at trading standpoint, a good zone to reduce portions of long-exposure / raise protective stops…” Slope resistance held into June open with the index plunging more than 2.6% before rebounding off uptrend support last week – that rally is now testing a key pivot zone at into the 103-handle and we’re looking for possible inflection here. Note that the index has continued to contract within the yearly opening-range and keeps the medium-term focus on a breakout of the 102-103.63 range in the weeks ahead.

US Dollar Index Price Chart – DXY 240min

Chart Prepared b/y Michael Boutros, Sr. Technical Strategist; DXY on TradingView

Notes: A closer look at USD price action shows DXY rebounding off the lower parallel on Thursday with the advance now eyeing confluent resistance at 102.95/99 (2016 high close / 2020 highs). A topside breach / close above this threshold is needed to validate a near-term breakout towards a more consequential level at 103.49/63- a region defined by the objective yearly open, the 100% extension off the recent advance, and the 61.8% Fibonacci retracement of the  monthly decline. Look for a larger reaction there IF reached.

Initial support rests with last week’s channel line (currently ~102.50s) backed by the 102-handle. Note that a break / close below this threshold would invalidate the April uptrend with such a scenario exposing subsequent support objectives at the yearly low-day close (101.58) and the February lows at 100.82.

Bottom line: A rebound off uptrend support is now testing the first resistance hurdle around the 103-handle. From at trading standpoint, a good zone to reduce portions of long-exposure / raise protective stops – losses should be limited to the 102-handle IF price is heading higher on this stretch with a breach above 103.63 needed to fuel the next leg higher in price towards 104.32 and 104.79. Keep in mind we are heading into the close of the month / quarter – stay nimble here and watch the weekly close for guidance into the July open. Review my latest US Dollar Weekly Technical Forecast for a longer-term look at the DXY trade levels. 

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

Follow Michael on Twitter @MBForex