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US Dollar Technical Outlook: DXY Maintaining Status Quo, Weak

US Dollar Technical Outlook: DXY Maintaining Status Quo, Weak

Paul Robinson, Strategist

USD Technical Outlook

  • US Dollar Index (DXY) failing to hold all rallies, maintaining weakness
  • Yearly and other important long-term lows just beneath current levels

US Dollar Technical Outlook: DXY Maintaining Status Quo, Weak

The price action in the US Dollar Index (DXY) continues to be weak, with every attempt to rally quickly met by sellers. The reversal day on Friday was yet another such turn that could have the DXY finally testing the 2021 low and worse.

The pop on Friday initially had price above the trend-line running lower off the March 31 high, but with it closing back underneath the declining line of resistance remains in play as a firm guide. A closing candle above it won’t necessarily mean we see the trend turn, but would be a warning sign.

On the downside, price is currently floored around a key reversal day from back in late February. We have seen numerous attempts to break lower in the past couple of weeks, but nothing has stuck. A breakdown here will have the 2021 low in play at 89.20.

A test of the yearly low, as discussed last week, could spark a bout of volatility. It may not be enough to put in a meaningful low, but we could see the largest bounce since this leg lower began over two months ago.

We will have to carefully monitor any type of move higher for signs of sustainability, as all rallies of recent have only lasted a handful of days before seeing momentum stall.

Should we see a firm break of the yearly low, the 2018 low (which has support as far back as 2008) will become the next major level to watch. The exact low clocks in at 88.25. Thea area surrounding it is likely to induce an even larger reaction than the yearly low. But for now we will focus on the immediate levels at hand and discuss at a later time what may happen at those longer-term levels should they come into play.

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.