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US Dollar Technical Outlook: DXY Explodes off Trend-line, Headed Higher

US Dollar Technical Outlook: DXY Explodes off Trend-line, Headed Higher

Paul Robinson,
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USD Technical Outlook

  • DXY tagged May trend-line, exploded higher on Friday
  • The turnabout makes higher levels likely ahead
  • Big resistance test could be coming in days to follow
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US Dollar Technical Outlook: DXY Explodes off Trend-line, Headed Higher

Last week, when we looked at the US Dollar Index (DXY), the focus was a support shelf around the 93.50 level, and if that broke then the trend-line from May would quickly become another line of defense. The initial support broke, but the May trend-line found itself not only holding but helping create an important near-term low.

The Friday explosion from support with in the context of an uptrend suggests higher levels are around the corner. Looking ahead, there is the high from last month at 94.56, but it is the March 2020 low just beyond there that is the biggest level of interest.

The March 2020 low at 94.65 was confirmed as important during September 2020 when it became a point of resistance. And you can really say it was once again confirmed last month when the DXY fell just shy of it by nine ticks.

On further strength will this be the time the level finally breaks? We will closely monitor momentum for signs of whether buyers can push it through or not.

Tactically speaking, the trading bias is to the top-side until that big level of resistance comes into play. We will reevaluate at that time based on price action. It could be that longs may want to be reduced or closed at that time, and shorts may want to dig in. Or, we could see a clear push through that further increases a bullish trading bias.

A drop lower from current levels would again have the May trend-line in play and again it would be respected as support. To turn the outlook bearish, a break below the trend-line and the Thursday low at 93.27 is needed.

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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.