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US Dollar Technical Outlook: DXY Positioned to Continue Higher

US Dollar Technical Outlook: DXY Positioned to Continue Higher

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USD Technical Outlook

  • US Dollar Index (DXY) built a short-term base to rally from
  • A new short-term high looks like it will come soon
  • Bigger picture turn may be underway

USD Technical Outlook: DXY Positioned to Continue Higher

The US dollar took a breather last week, retracing to varying degrees against various currencies. The US Dollar Index (DXY), which is heavily weighted in the EUR, underwent a minor retracement that looks like a healthy correction.

The basing price action is occurring around the 200-day, with a couple of minor daily rejections showing a willingness by buyers to step in. The market was caught by surprise at the June Fed meeting and market participants look poised to continue adjusting their positioning.

It looks unlikely we will see another drop lower, but as long as 91.51 stays intact on a daily closing basis then the bias is neutral at worst. Looking higher, the first level to hurdle is the recent high at 92.40. A breakout beyond there will have the September trend-line in play.

That will be an interesting spot to see how the market reacts, because if the DXY can climb above the Sep t-line, then then we could see a significant test of the 93.43 swing-high, a level that may have major intermediate-term implications.

For the most the USD index has been in a clear downtrend since March of last year. However, that could be changing with the May low higher than the January low, and if the DXY can rally above the March high there will be a higher low, higher high scenario developing. A big turn may be getting underway.

For now, though, taking it one step at a time. The focus is on the basing price action and whether the DXY can rally to a new short-term high (>92.40) and the Sep t-line. From that point, should we reach it, we can begin thinking about the bigger picture.

US Dollar Index (DXY) Daily Chart

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.