USD Technical Outlook
- DXY coiling up into a triangle on support
- A resolution looks imminent this week
US Dollar Technical Outlook: DXY Coils Tighter, Breakout Imminent
The US Dollar Index (DXY) is coiling up towards the apex of a triangle pattern on the daily chart, and doing so with the underside trend-line of the pattern consisting of a solid line of slope of support. With the trend pointed higher it appears most likely that the breakout will resolve higher, but we can’t rule out a downside break.
There is a lot of CB activity this week with several meeting for rate decisions and providing guidance. The FOMC, BoE, ECB, and BoJ are on deck this week, so the timing of the apex of the wedge and catalysts makes for interesting confluence.
The way I’ll approach this is to play the break, whichever way that may be. If the triangle breaks to the top-side, then the first level to watch is 96.93, the top of the pattern. The first level of meaningful resistance arrives higher at 97.80.
On the flip-side, a breakdown out of the triangle will also mean a decline below slope support that has done such a good job lately of keeping the DXY pointed higher. This would be a break against the trend and could send the DXY sharply lower with the crowd caught leaning the wrong way. The big level to watch after the bottom of the triangle at 95.51, is support around the 94.67 area that extends over from the March 2020 low.
US Dollar Index (DXY) Daily Chart
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---Written by Paul Robinson, Market Analyst
You can follow Paul on Twitter at @PaulRobinsonFX
