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US Dollar Technical Outlook: DXY Hitting Important Area of Resistance

US Dollar Technical Outlook: DXY Hitting Important Area of Resistance

Paul Robinson, Strategist

USD Technical Outlook

  • US Dollar Index (DXY) is choppy around a line of resistance from September
  • How price action unfolds here could shape both short and intermediate-term
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US Dollar Technical Outlook: DXY Hitting Important Area of Resistance

The US dollar has been see-sawing back and forth around a line of resistance, and how things play out here could have both an impact on the short and intermediate-term outlook. Broadly speaking, the downtrend is still intact from the March 2020 top, albeit it’s losing its shape with the recent higher low created in May (relative to the January low).

A push beyond the line running over from September would bring into play the possibility that a higher high (relative to the March high) is developing. This may be a significant development given the aforementioned higher low. The tide would be turning to the upside.

On the flip-side, if the recent struggles give-way to selling, then a lower-high could develop that keeps DXY forced to trade within a range at best, if not begin another larger leg lower. The first area of short-term support arrives at 92.

From there we would look to 91.51 and the falling 200-day as the next levels of support. In the event of material weakness, a trend-line rising up from the Jan low could make up the underside of a wedge formation. Perhaps this will take a few months to really develop.

The DXY is at an important cross-road with trend-line resistance at hand, so we should have a near-term trading bias develop soon. The broader picture isn’t as clear and will require some more time before we can gain conviction one way or another.

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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.