US Dollar Technical Forecast: DXY Aims at Yearly High Despite Clashing Signals
US Dollar Technical Forecast: Bullish
- US Dollar Index (DXY) moves within 0.5% of its 2021 high
- The DXY index is displaying conflicting technical signals
- Downside risks present, but uptrend remains unscathed
US Dollar bulls cheered last week as the US Dollar Index (DXY) clawed its way higher. A broader rally has seen prices climb almost 4% since May. The 2021 high at 93.43 is now within striking distance, putting DXY in the spotlight this week. Eclipsing that level would mark a decisive victory for the Greenback and likely fuel further upside potential.
The US Dollar’s path higher is not without risks. While the Greenback remains in an uptrend, putting an inherently bullish bias on its near-term outlook, more upside is far from certain. Since June, prices have carved out a Rising Wedge pattern. This may lead to a reversal if the wedge’s support line gives out. The Relative Strength Index (RSI) shows a negative divergence, with the oscillator making lower lows alongside higher highs in price.
Despite bearish signals, the DXY’s path of least resistance likely points higher. The prevailing trend offers the best evidence for that view. As the adage goes, the trend is your friend. Moreover, a Golden Cross appears to be imminent between the 50- and 200-day Moving Averages. The high-profile technical signal has the potential to send prices charging higher. All things considered, the US Dollar’s technical outlook is positive, but traders should remain cautious given the clashing signals.
US Dollar 8-Hour Chart
Chart created with TradingView
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--- Written by Thomas Westwater, Analyst for DailyFX.com
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DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.