US Dollar Technical Analysis: Testing Uptrend, Watch EUR/USD at Resistance
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USD Technical Outlook
- US Dollar Index (DXY) declining briskly out of rising wedge
- Support levels to watch as the decline unfolds
- EUR/USD at a big level of trend resistance
US Dollar Technical Analysis: Rising Wedge Leading to Trend Test
Last week the US Dollar Index (DXY) did a small head-fake higher before breaking lower out of a rising wedge pattern, a scenario we discussed on a couple of occasions before and while it happening. The natural course once a head-fake like this is resolved is for price to decline.
How far, though, is always the big question. Typically, the minimum objective is the bottom of the pattern, which in this case is 107.58. The session low thus far is 107.81, so for the most part the first price level has been met. If this level holds we could see the DXY turn around soon, especially if the EUR/USD is going to hold the downward channel it has been stuck in.
The Euro accounts for ~57% of the DXY and so it is the big driver here. There is a clear downward channel and with price around the top of the channel we may see sellers step back in once again. If this is the case then the DXY will very likely not fall much further, if at all.
However, if the Euro can break out then the trend-line from earlier in the year may be up next for the DXY. This would be considered a sizable test as the general trend continues to strongly favor a stronger USD.
With the EUR/USD top-side channel line in focus this could be a very pivotal week for both the single currency and the DXY index.
US Dollar Index (DXY) Daily Chart
EUR/USD Daily Chart
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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.