US Dollar technical forecast: USD battle lines drawn at key support

US Dollar Index technical forecast: DXY weekly trade levels

• US Dollar Index attempting to mark fifth-consecutive weekly decline
• USD testing key pivot zone at uptrend support- risk for inflection / downside exhaustion
• DXY resistance 103,104.63, 105.73-106.15– support 101.63, 100, 98.97, 97.25/69

The US Dollar Index plunged more than 4.2% off the yearly highs with the decline now taking the greenback into longer-term uptrend support near the January lows. 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 DXY sell-off was approaching a major pivot zone around 103 and that, “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.” A four-week decline registered an intraday low at 101.41 (a close low of 101.57!) last week before rebounding with the index carving out the April opening-range just above this critical support zone.

A break / weekly close below this threshold would threaten resumption of the late-2022 downtrend (blue) with such a scenario exposing the 100-psychological barrier, the 61.8% Fibonacci retracement of the 2021 rally at 98.98 and 97.25/69- a region defined by the 61.8% extension of the September decline and the 2018 swing high. Note that this threshold converges on the 2011 original slope over the next few months.

Weekly resistance now stands with the yearly low-week close / 2016 high close at 103 with broader bearish invalidation steady 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. A breach above this threshold would constitute a breakout of the yearly opening-range and suggest a more significant reversal is underway / resumption of the broader uptrend.

Bottom line: The US Dollar is threatening a fifth consecutive weekly decline into a key support pivot with the April opening-range taking shape just above. From a trading standpoint, a good zone to reduce short-exposure / lower protective stops – be on the lookout for a possible exhaustion low while above slope support with a breakout of the monthly opening-range to offer guidance here- mind the weekly close. 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

• Crude Oil (WTI)
• S&P 500 (SPX500)
• Euro (EUR/USD)
• Canadian Dollar (USD/CAD)
• British Pound (GBP/USD)
• Gold (XAU/USD)
• Japanese Yen (USD/JPY)
• Australian Dollar (AUD/USD)

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

Follow Michael on Twitter @MBForex