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US Dollar Technical Outlook: USD Trying to Break-free, Sustain a Rally

US Dollar Technical Outlook: USD Trying to Break-free, Sustain a Rally

Paul Robinson,
What's on this page

US Dollar Technical Outlook:

  • USD Index (DXY) challenging prior highs, fade or break?
  • Longer-term channel at risk of breaking with a little more push

For the intermediate-term fundamental and technical outlook on major asset classes and educational content, check out the DailyFX Forecasts & Trading Guides.

USD Index (DXY) challenging prior highs, fade or break?

The US Dollar Index (DXY) is up against the top of a rising channel in place since over a year ago. In this low-volatility regime it has been unable to find the momentum needed to break on through to the other side. This lack of momentum in either direction has made trading a bit frustrating, but that could soon change.

The Dollar will need to climb above the top-side trend-line, but it won’t be easy with it having had numerous touch points to strengthen its presence. If the DXY can take out the upper parallel, then a momentum-move could ignite and with it an increase in volatility.

On the flip-side, should we continue to see the Dollar act as it has, then look for another pullback to ensue. However, a decline may be short-lived compared to prior times. The shorter-term rising channel off the June low is in relatively close proximity to current levels, and with price action wedging up near the top of the larger channel line a break may be very near after perhaps one last pullback.

All-in-all in the coming week, a sustained break above the upper parallel by the close of the week could set things up well for the final quarter of the year, and if it is more of the same grind it may not be more of the same for long as price gets pent up to make a move.

Check out the IG Client Sentiment page to find out how changes in retail positioning could signal the next price move in major markets.

US Dollar Index (DXY) Weekly Chart (channel dictating)

Weekly DXY Chart

US Dollar Index (DXY) Daily Chart (wedging at top of channel)

Daily DXY Chart

U.S. Dollar Currency Index (DXY) Charts by TradingView

Helpful Resources for Forex Traders

Whether you are a new or experienced trader, we have several resources available to help you; indicator for tracking trader sentiment, quarterly trading forecasts, analytical and educational webinars held daily, trading guides to help you improve trading performance, and one specifically for those who are new to forex.

---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.