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US Dollar, Euro Technical Outlook: Poised for Larger Breakout

US Dollar, Euro Technical Outlook: Poised for Larger Breakout

Paul Robinson, Strategist

USD, Euro Technical Highlights:

  • USD Index (DXY) set to make a lasting break higher soon
  • Euro will naturally be the currency to lead the move

Check out the intermediate-term fundamental and technical outlook in the Q3 USD Forecast.

USD Index (DXY) set to make a lasting break higher soon

It’s been a grind trading the Dollar as a whole, with the US Dollar Index (DXY) chopping around for over a year. A strong move during the first 7-8 months of 2018 has given way to a slow grind higher. At some point this will end, the strong up, then grind higher pattern appears likely to resolve higher.

A break above the upper parallel in place since late 2016 along with the upper parallel from the grinding channel since a year-ago should get the DXY moving towards the 2017 highs or better. But there is still room for these low momentum moves to crack lower and, in this scenario, take the Dollar towards the 2011 trend-line.

This is seen as the lesser likely scenario, but can’ be ruled out. A weekly close below 95.84 (June low) could prove to be pivotal and catch the crowd leaning the wrong way. A break against the trend could spark a strong move lower to the trend-line off the 2011 low running under the 2018 trough.

The key in either scenario is for a breakout of either of the aforementioned technical thresholds. Once a breakout takes shape, we can move in to the shorter-term time-frames to identify set-ups along the path of least resistance…

US Dollar Index (DXY) Weekly Chart (ready to launch or fail?)

US Dollar, Euro Technical Outlook: Poised for Larger Breakout

U.S. Dollar Currency Index (DXY) by Tradingview

Euro will naturally be the currency to lead the move

Accounting for ~57% of the DXY the Euro will naturally be a part of the move. The grind since last year has been, well, a real grind, but this won’t last forever. A breakdown below the lower trend-line running over from last year will have EURUSD trading towards the April 2017 French election gap-fill and the 2000 trend-line. On the flip-side, a break above 11412 should have the 2008 trend-line in focus.

EURUSD Weekly Chart (ready to make a move...)

US Dollar, Euro Technical Outlook: Poised for Larger Breakout

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---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.

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