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US Dollar Technical Forecast: Can USD Bulls Take Out Resistance?

US Dollar Technical Forecast: Can USD Bulls Take Out Resistance?

James Stanley, Senior Strategist

US Dollar Talking Points:

  • USD bulls came back into the equation on Friday of this week, following last week’s pullback from a key area of support on the chart.
  • The Q4 bearish theme remains of interest, as the October sell-off continues to loom large after early-November trade saw a 50% pullback in that theme.
  • DailyFX Forecasts are published on a variety of markets such asthe US Dollar or the Euro and are available from the DailyFX Trading Guides page.

We’re just past the mid-point in Q4 and already a couple of different themes have shown with prominence in the US Dollar. The currency folded lower in October as price action fell through the bottom of a rising wedge formation as was looked at in the Q4 Technical Forecast for the US Dollar. That theme of USD weakness ran through the October FOMC rate decision at which the Fed cut rates for the third time this year but, while doing so the bank also hinted that policy would be on pause until something changed in the backdrop. That lack of dovishness helped USD to recover in the first two weeks of November and this brought a 50% pullback in the October sell-off, with DXY finding resistance at a familiar area on the chart, very similar to the tops that came in during April and May price action.

US Dollar Daily Price Chart

US Dollar Price Chart

Chart prepared by James Stanley; US Dollar on Tradingview

For next week, the US Dollar has high-impact items on the economic calendar for both Tuesday and Wednesday, while Thursday brings the Thanksgiving holiday. Traditionally, the following Friday is a low-activity type of backdrop in the US as a number of traders will take the day off for an extended weekend. The day after Thanksgiving, commonly called ‘Black Friday,’ usually brings a lower-liquidity backdrop in currency markets and domestic US equity markets are only open for half of the day. But, this doesn’t mean that volatility potential is completely dampened, as that low-liquidity backdrop combined with some headline risk could keep prices on the move.

US Dollar Strategy

I had looked on both sides of the US Dollar in my recent analyst pick, looking for USD-weakness against the British Pound and perhaps the Euro while looking for strength against commodity currencies such as the Australian and Canadian Dollars.

In the US Dollar, the big item of interest is on resistance around the November highs, taken from that 98.33-98.50 zone. Until that area of the chart is taken out by buyers, potential for short-side swings remains. But, given the pace of this week’s gains, a direct bearish stance seems imprudent, and as such, the technical forecast for next week will be set to neutral on the US Dollar. This highlights the importance of picking the proper spots for either theme of strength or weakness.

Technical Forecast for the US Dollar Next Week: Neutral

US Dollar Eight-Hour Price Chart

US Dollar Technical Forecast: Can USD Bulls Take Out Resistance?

Chart prepared by James Stanley; US Dollar on Tradingview

To read more:

Are you looking for longer-term analysis on the U.S. Dollar? Our DailyFX Forecasts have a section for each major currency, and we also offer a plethora of resources on Gold or USD-pairs such as EUR/USD, GBP/USD, USD/JPY, AUD/USD. Traders can also stay up with near-term positioning via our IG Client Sentiment Indicator.

Forex Trading Resources

DailyFX offers an abundance of tools, indicators and resources to help traders. For those looking for trading ideas, our IG Client Sentiment shows the positioning of retail traders with actual live trades and positions. Our trading guides bring our DailyFX Quarterly Forecasts and our Top Trading Opportunities; and our real-time news feed has intra-day interactions from the DailyFX team. And if you’re looking for real-time analysis, our DailyFX Webinars offer numerous sessions each week in which you can see how and why we’re looking at what we’re looking at.

If you’re looking for educational information, our New to FX guide is there to help new(er) traders while our Traits of Successful Traders research is built to help sharpen the skill set by focusing on risk and trade management.

--- Written by James Stanley, Strategist for DailyFX.com

Contact and follow James on Twitter: @JStanleyFX

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

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