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US Dollar Technical Analysis: DXY Trend Towards 2018 Low Continues

US Dollar Technical Analysis: DXY Trend Towards 2018 Low Continues

Paul Robinson, Strategist

USD Technical Outlook

  • US Dollar Index (DXY) failed last week at important resistance
  • Burst lower puts it in position to sail towards 2018 lows
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US Dollar Technical Analysis: DXY Trend Towards 2018 Low Continues

The US Dollar Index (DXY) failed several times last week to break a notable level of resistance. Last Monday, I looked at the area immediately surrounding 91.40 as a potentially solid risk/reward spot for establishing a short (that is was), even if at the moment there appeared a chance the dollar may rally.

The drop off resistance has the April low out of the way and February low at 89.68 in play. It appears momentum is set to push price to that point. It isn’t viewed as a major level of support, that doesn’t arrive until the 2021 low at 89.20.

We may see a minor bounce develop off the Feb low, but that is all that is anticipated. And if the trend from the March 2020 high is to continue asserting itself, and signs point to that right now, then look for the 2021 low to break as well. Although a meaningful reaction may develop first at that juncture; we’ll keep a close eye on price behavior around the 89.20 mark.

Longer-term, the 2018 low at 88.25 looks at risk of being tested or worse. When you dial back on the weekly/monthly time-frames, we can see that despite at times the dollar appearing poised to make big moves in all actuality the DXY has been rangebound for a few years. It’s possible we see another hold of the range, but we’ll address that should the time come.

In the short-term, the April low at 90.42 and low-angled trend-line from January will be viewed as resistance on a retracement. This could offer good risk/reward entries for would-be shorts. The next targeted level of support at 89.68 and 89.20.

US Dollar Index (DXY) Daily Chart (Feb, Jan lows appear next)

USD daily chart

US Dollar Index (DXY) Weekly Chart (trending towards 2018 low)

dxy weekly 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.

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