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US Dollar Price Outlook: USD Recovery Trade – DXY Trade Levels

US Dollar Price Outlook: USD Recovery Trade – DXY Trade Levels

Michael Boutros, Strategist

The US Dollar is rebounding off confluence support this week after plunging more than 0.7% off the monthly highs. The recovery may be vulnerable however and the threat for further losses remains IF price is fails to properly mount the 98-handle this week. These are the updated targets and invalidation levels that matter on the DXY price charts. Review my latest Weekly Strategy Webinar for an in-depth breakdown of this Sterling price setup and more.

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US Dollar Index Price Chart - DXY Daily

US Dollar Index Price Chart - DXY Daily - USD Trade Outlook - Technical Forecast

Chart Prepared by Michael Boutros, Technical Strategist; DXY on Tradingview

Technical Outlook: In my last US Dollar Price Outlook we noted that DXY was testing confluence support with, “a break below 97.21 needed to fuel the next leg lower in price.” The index briefly registered a low at 97.11 early in the month before reversing sharply higher with the rally failing last week at confluence resistance at 98.40. Price is now rebounding off the 97.71 support zone yet again as the dollar continues to coil below the October trendline – note the highlighted confluence zone around ~98.15/20. The immediate focus is on a breakout of the 97.71-98.20 range.

US Dollar Index Price Chart - DXY 120min

US Dollar Index Price Chart - DXY 120min - USD Trade Outlook - Technical Forecast

Notes: A closer look at US Dollar price action shows DXY trading within the confines of an ascending pitchfork formation extending off October / November lows. Price is attempting to breach weekly open resistance today at 97.95 but the recovery remains vulnerable while below the Fibonacci confluence at 98.13/15.

Initial support rests with the lower parallel backed by the 61.8% retracement / 2018 high at 97.63/71- look for a close below this threshold to validate the break with such a scenario once again targeting critical support at 97.21/31 – expect a bigger reaction there IF reached.

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Bottom line: The immediate focus is on the US Dollar recovery with the near-term rally vulnerable ahead of 98.13/15. From at trading standpoint, a good spot to reduce long exposure / raise protective stops. We’ll be on the lookout for topside exhaustion / possible short-entries while below resistance targeting a downside break of this formation. IF price holds slope support, look for a breach above 98.15 to mark resumption back towards 98.40. Review my latest US Dollar Weekly Price Outlook for a closer look at the longer-term DXY technical trading levels.

For a complete breakdown of Michael’s trading strategy, review his Foundations of Technical Analysis series on Building a Trading Strategy

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- Written by Michael Boutros, Currency Strategist with DailyFX

Follow Michael on Twitter @MBForex

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

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