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US Dollar Technical Outlook: DXY Set Up for More Selling

US Dollar Technical Outlook: DXY Set Up for More Selling

Paul Robinson, Strategist

US Dollar Technical Outlook:

  • US Dollar Index (DXY) looks headed lower out of sideways pattern
  • The 2018 low appears at risk in the coming weeks
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The US Dollar Index (DXY) has been treading water lately after dropping through the September low to its worst levels since 2018. That looks set up to continue with the weak price action we have been seeing in recent trade.

The two week horizontal price action should at least lead to a short-term move that will continue to trek towards the 2018 low at 88.25. With how trading has been going lately, that feels like a good distance lower. However, we could see a bit of acceleration given no real big support is around until then.

We could continue to see further horizontal trading, but with the FOMC meeting tomorrow there could be reason for markets to move. Or not.

For now, the general trading bias is bearish and will remain that wait unless we see a material turnaround and the ability to hold a rally. This is seen as an unlikely event at this time. The thinking is that if we should see a drop down into the 2018 low, then we might see a tradeable rally or more develop.

The US Dollar Index (DXY) is largely dominated by the Euro with it having ~57% of the index weighting. Keep an eye on EUR/USD as well for perhaps early indications as to how things may play out.

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US Dollar Index (DXY) Weekly Chart (heading towards 2018 low)

dxy weekly chart

US Dollar Index (DXY) Daily Chart (sideways move sets up for more losses)

dxy daily chart

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

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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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