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US Dollar Technical Outlook: 2021 High for DXY Coming into Focus

US Dollar Technical Outlook: 2021 High for DXY Coming into Focus

Paul Robinson, Strategist

USD Technical Outlook

  • Two week sideways congestion pattern giving way to a breakout at the moment
  • Sustained breakout setting DXY up for a rally to the 2021 highs and higher
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US Dollar Technical Outlook: 2021 High for DXY Coming into Focus

The US dollar trading sideways has led to the development of a steady base from which the DXY is trying to rally from. Last week, we were looking at trend-line resistance from September, but soon that will have been cleared as long as we see today’s breakout hold.

Given the healthy length of time the DXY has been consolidating and the trend-line it is climbing above, a rally to the yearly high at 93.43 is anticipated. Taking it one step at a time, if the DXY can reach the 2021 high we will need to monitor price behavior around the level for signs of momentum either pushing it through or leading to failure.

If today’s rally fails it doesn’t necessarily mean the dollar is doomed for lower prices, but it will need to get into gear again and close into fresh multi-month high territory to reignite a bullish bias. A failure to stay in breakout territory/above resistance is seen as a low probability scenario at the moment.

Tactically speaking, as long as a breakout holds up here, then the trading bias is from the long side and will remain so until either we see a failure back below current levels or a strong rejection develops at the yearly high.

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US Dollar Index (DXY) Daily Chart

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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.