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US Dollar Technical Analysis: DXY Poised for Yearly Lows at Some Point

US Dollar Technical Analysis: DXY Poised for Yearly Lows at Some Point

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USD Technical Outlook

  • US Dollar Index (DXY) trend from last March picking up steam again
  • February and January lows up next on radar, could take a few weeks

US Dollar Technical Analysis: DXY Poised for Yearly Lows at Some Point

The US Dollar Index (DXY) is starting off the week accelerating the recent trend lower. Last week the expectation was for weakness to continue it the near-term, with the possibility it would morph into a longer-term trend resumption. That looks to be the case.

Support from March around 91.30 is breaking. A close below the level will provide confirmation, so far it is below on only an intra-day basis. A close below will at the least indicate another sign that sellers are in control, even if a small bounce develops back above the threshold.

It will take a lot to turn the tides in favor of the dollar. Likely a sharp, surprising turn in risk sentiment will be required at this juncture. Looking lower, it may take a few weeks to arrive at the February low of 89.68 and the January low of 89.20, but nevertheless a broader decline sets the tone for short-term maneuvers.

Tactically, the near-term trend is a bit extended putting fresh shorts at risk of a snapback. But a bounce or consolidation period may offer would-be shorts a good risk/reward opportunity to enter. For those short from higher levels, slowly moving stops down to protect profits may be a prudent play. Letting them ‘work a little’ could be a good approach to catching the broader sell-off.

In the absence of support and any kind of reaction off support, longs hold no appeal from where I sit. Should the DXY tank into support and show a strong reaction, then perhaps a countertrend bounce may have some edge to it. But for now, it looks like an uphill battle.

USD Forecast
USD Forecast
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US Dollar Index (DXY) Daily Chart (looking towards Feb/Jan lows)

USD DXY daily chart

DXY Chart 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.