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US Dollar Technical Outlook: Make or Break Support Before End of Year?

US Dollar Technical Outlook: Make or Break Support Before End of Year?

2020-11-16 12:00:00
Paul Robinson, Strategist
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US Dollar Technical Outlook:

  • US Dollar Index (DXY) trading around long-term support
  • Will we see any kind of resolution before year end?
  • Support is to be respected until broken
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The US Dollar Index (DXY) remains stuck in a period of generally poor trading conditions as choppy price action dominates. It is hard to say for how much longer this will last, but there is reason to believe that a meaningful price swing isn’t too far off in the distance.

Where the DXY trades now is at a cross-road of long-term support levels coming by way of a horizontal level dating back to 1998 and a trend-line from 2011. The confluence of these two lines makes the area right around 92 important and potentially explosive at some point.

From a risk/reward standpoint it makes sense to continue to respect support. A would-be buyer could use the 92-area as a spot with potentially good risk/reward. A drop through the August low at 91.74 would be reason to abandon a bullish bias, while still holding the possibility of a lot of upside.

If support ends up failing, given the current proximity that price is to support, a would-be seller could wait for confirmation without giving up too much in terms of potential profit, while reducing the risk of an adverse move higher.

In any case, whether looking to be long, short, or simply stay flat until further clarity, the US Dollar Index won’t sit here forever, and given the significance of support the next move could be a big one.

USD Forecast
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US Dollar Index (DXY) Weekly Chart (trading at long-term support)

US Dollar Index (DXY) weekly chart

US Dollar Index (DXY) Daily Chart (choppy price action still)

US Dollar Index 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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