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US Dollar Technical Analysis: Test of Support Lies Just Ahead

US Dollar Technical Analysis: Test of Support Lies Just Ahead

Paul Robinson, Strategist

USD Technical Outlook

  • US Dollar Index (DXY) dropping into area of support
  • How support holds could determine the intermediate-term outlook

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US Dollar Technical Analysis: Test of Support Lies Just Ahead

The US Dollar Index (DXY) appears vulnerable to at least a little more selling as support still lies a bit lower. There is good support coming in around the 10929/10900 area via a few different technical thresholds.

There is a trend-line from February in confluence with the July high at 10929 and a slope running off the early September high. A push into or even below support followed by a strong bullish rejection could turn the tides of this corrective period around.

It would seem at some point soon this could be the case, but will need to see some more evidence first that the decline could be over. What was outlined above could be just that type of scenario. However, if support fails to hold and we see the DXY slice through support then the downside opens up.

The next level of support is around the 10770 level, with potential for the 200-day MA to come into play. That would be a rather significant decline, but within the realm of possibility before the broader uptrend resumes.

For now, though, the focus is on immediate support and how it can hold, if it can. Traders who have been short may want to button up trailing stops in the event we get a strong reaction off support. If support breaks then shorts could run for a bit longer. For would-be longs a good risk/reward opportunity could be near if support holds.

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US Dollar Index (DXY) Daily Chart

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---Written by Paul Robinson, Market Analyst

You can follow Paul on Twitter at @PaulRobinsonFX

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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