USD Technical Outlook
- DXY firming up nicely just beneath the yearly high
- March 2020 low will become targeted on breakout
US Dollar Technical Outlook: DXY Ready to Challenge Yearly High
The US Dollar Index (DXY) has been quietly firming up in recent weeks, with the price action beginning to take on the shape of an ascending wedge. This development is happening under the yearly high created in March at 93.43.
Given the pent up nature of price action beneath such a critical level, it appears it is just a matter of time before we see the yearly high taken out. This is seen as leading the DXY to the March 2020 low at 94.65, a level that was validated as resistance back in September.
Before getting to that point, it will be important for the index to continue staying firm; a break below 92.47 would be reason for caution as the recent higher low would be breached. It wouldn’t necessarily turn the picture outright bearish, but certainly undermine the bullish case.
Tactically speaking, the ascending wedge structure is very near breaking (93.19) and would-be longs may want to enter even though the yearly high is not far ahead. The thinking is that even if a failure occurs at the yearly high a decision can be made as to whether to maintain a position or not. If the yearly high is broken then staying with or even taking a more aggressive stance may be the way to play.
For shorts to gain appeal, it will at the least take a strong rejection at the yearly high or a breakdown of the ascending wedge pattern. While this could certainly happen, it is seen as a lower probability scenario at this time.
US Dollar Index (DXY) Daily Chart
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---Written by Paul Robinson, Market Analyst
You can follow Paul on Twitter at @PaulRobinsonFX
