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US Dollar Technical Analysis: DXY Trying to Turn Bounce into Sustained Rally

US Dollar Technical Analysis: DXY Trying to Turn Bounce into Sustained Rally

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USD Technical Outlook

  • US Dollar Index (DXY) still in range in a macro context
  • Can’t rule out that we aren’t seeing a big shift higher
  • Shorter-term levels and lines to watch for cues

USD move corrective or becoming some more?

Since the early days of the year the U.S. Dollar Index (DXY) has been firming up, with the current leg acting as a second attempt at a run. But is it corrective or the beginning of something larger? On the monthly chart the Jan low came around a support zone back to 2009.

For about the past five years the DXY has been relatively range-bound, so it is possible that taking into consideration support and a broadly trend-less market, that we could see another swing back above 100. And be relatively meaningless in the grand scheme of things.

From a trading perspective, though, that would be quite the meaningful move if the DXY rallied towards the 2017/2020 highs between 103 and 104.

Right now, the DXY is above the September low, a level that was carved out around an area dating as far back as 1998. Furthermore, the index is working on clearing the top of a developing channel. This could soon see the DXY trading at the declining 200-day MA at 92.91.

From a tactical standpoint, buying into the rally may pose pullback risk. Would-be longs may want to consider joining in on a minor pullback/consolidation sequence versus paying up here. On the flip-side if we see the DXY turn lower here with vigor, then perhaps the notion of a corrective move will still prove valid. If that happens, then would-be shorts may look for the next move to take price to the lower parallel around 90.

All-in-all, momentum is favorable for higher prices, but to get a sense if it is a sustainable rally or not a test of the current move may be necessary to provide better cues for taking action.

USD Forecast
USD Forecast
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US Dollar Index (DXY) Monthly Chart

DXY monthly chart

US Dollar Index (DXY) Daily Chart

DXY daily chart

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.