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US Dollar Technical Outlook: DXY Testing Uptrend, Support

US Dollar Technical Outlook: DXY Testing Uptrend, Support

Paul Robinson, Strategist

USD Technical Outlook

  • DXY continues to test the trend and support
  • How price action continues to play out here will determine

US Dollar Technical Outlook: DXY Testing Uptrend, Support

Since nearing the low (resistance) created back in the early days of the pandemic, the US Dollar as per the DXY index has been backing-and-filling. It has been doing so in what looks to be a corrective manner, but now that support within the context of the uptrend is being thoroughly tested the USD is getting closer and closer to bit of a make or break situation.

For a week now support has been holding via a horizontal level and top-side trend-line running over from August and March, respectively. This is making for a good spot to see the DXY strengthen from, but even if we get a little more weakness to the trend-line from the May low, the broader outlook could still remain bullish.

A turn from here or the trend-line just below would have the mid-94s back in focus as major resistance to overcome if the rally from May is to continue to grow legs. We will of course be monitoring price action should that become relevant.

On the flip-side, if we see price breakdown from here to the trend-line from May it will be important that it holds. A failure to do-so could indicate that the corrective-looking pullback we are seeing now is morphing into an outright trend reversal that could lead to an extended decline.

From a tactical standpoint, we must respect support until it is broken. This means longs still appear more attractive than shorts and support levels can be used to assess risk and setting stop losses for long exposure. Would-be shorts may be best served waiting for support to first break.

US Dollar Index (DXY) Daily Chart

us dollar index, dxy

DXY Chart by TradingView

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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.

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