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US Dollar Technical Outlook: DXY Running Towards New Yearly Highs

US Dollar Technical Outlook: DXY Running Towards New Yearly Highs

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USD Technical Outlook

  • DXY trading higher towards a new yearly high
  • Watch price action for cues as to whether a breakout or not can develop
  • May be switching from low vol to high vol if stocks keep selling off

The US Dollar Index (DXY) is rallying as a strong dollar theme is starting to take shape, but we have seen this develop before only to see it falter. The yearly high at 93.72 is not far ahead along with a top-side trend-line from the March high.

Will resistance hold down the DXY or can we see a sustained push into new yearly territory? To get a better idea on which way it will play out we’ll want to watch momentum as levels come into view. So far momentum is healthy, but as we have seen before that can quickly change in this low volatility environment.

A rejection at resistance will have in focus more choppy price behavior and a potential set-up for a near-term trend reversal.

In the event the environment is changing towards a higher volatility regime, and this may indeed be the case with stocks starting to wilt a little here, then a sustainable breakout to new yearly highs could be in order.

If this the case, then the 94.65/75 level will become the next big one to watch. This initially came about when a low was created during the initial days of the pandemic, and then later validated during last September as a level when the DXY failed to trade above the March 2020 low.

All-in-all, the DXY has a chance here to run but still needs to prove it can maintain its legs.

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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.