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USDollar Technical Analysis: Trick or Treat For USD into Key Range?

USDollar Technical Analysis: Trick or Treat For USD into Key Range?

Tyler Yell, CMT, Currency Strategist

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Talking Points:

-US Dollar Technical Strategy: US Dollar Returns To Chart Resistance

-Recent Sharp Rises Have Been Followed By Corrective Moves to Range Lows

-US Dollar Could Stall After Strengthening To Shorter-Term Channel Resistance

The Federal Open Market Committee propped the US DOLLAR into a key range with four little words. The Federal Reserve noted that “at its next meeting,” a rate hike is on the table. Referencing the chart below, you'll notice the recent move on October 28 brought us back into his own that the US Dollar has been unable to crack. The zone is specifically comprised of the high to low range of March 13, 2015, the high in 2015 so far in multiple dollar indexes and a potential double top on the equally weighted FXCM Dow Jones Dollar index.

The closing highs of both March 13 and April 13 of this year sit around 12,130. Also, the October 28 post -FOMC high of 12,110, 12,130 will be the focal point of resistance. Beyond those two levels, the March 13 high of 12,149, which aligns with an equidistant channel resistance, would be expected to the upside. Support currently sits at the weekly low of 12,004 and followed by the October low of 11,852. A break below 11,852 (not favored) could open up the most bearish picture this year for the US dollar.

Two components of the chart stand out that should bring caution to dollar bulls. First, momentum is stretched as the RSI (5) has reached overbought with the recent leg higher, and prior moves on the chart have run out of steam when RSI (5) shows extreme readings this year. Second, in 2015, buying the US dollar index within the zone of 12,064-12,149 has been a costly decision. Because the resistance has held so well this year, buyers may be better served to wait for a move back to the bottom of the range or a validated breakout with a weekly close above 12,149. T.Y.

We hope you enjoyed this short-term US Dollar Outlook, be sure to sign up for our free Dollar Guide here.

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