US Dollar Technical Outlook: DXY Bouncing from Support, for Now
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USD Technical Outlook
- DXY looking to continue bouncing from support
- A few different scenarios to consider as we move forward
The US Dollar Index (DXY) has been declining for over two weeks without much buying interest. That appears to be changing, even if only for a brief time. There is a slope running over from June that is bringing support at the moment.
Looking to potential top-side obstacles, the 4-hr chart shows the DXY generally channeling lower and thus presents a top-side trend-line to watch. Beyond that point is the pivot on August 13 at the 92.47 level. Neither are considered major resistance, but could nevertheless turn out to be points of contention.
We’ll have to monitor price action for cues as to whether the aforementioned levels will matter or not. If momentum can kick in and the bounce can morph into a real rally, then we may need to reevaluate the bounce-only scenario.
It doesn’t appear the most likely outcome at this time, but the recent decline could be a deep pullback in the trend dating to May. A rise up and failure to rally past the August high, however, could have a head-and-shoulders in play (July high, right shoulder; August, head, September (?), left shoulder). It is premature to think about that as a high probability scenario, but one worth keeping on the back burners for later on.
If we see price turn lower soon, watch last week’s low at 91.94 as a breakdown will also have the June slope broken. A break of support there may have perhaps a more important level in play via the July low at 91.78.
All-in-all, there a few ways this could play out, and this doesn’t make the outlook all that clear looking beyond the very short-term. It does look like at the least, though, we will continue to see some more strength in the very near-term.
US Dollar Index (DXY) Daily Chart
US Dollar Index (DXY) 4-hr 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.