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US Dollar Technical Outlook: Looking to Extend Breakout

US Dollar Technical Outlook: Looking to Extend Breakout

Paul Robinson,
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USD Technical Outlook

  • DXY broke above notable resistance dating to March 2020
  • Higher levels look to be the cards in the near-term
  • Lines and levels to watch in the days ahead
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US Dollar Technical Outlook: Looking to Extend Breakout

The US Dollar Index (DXY) closed last week above big resistance. It is a level (94.67) we had been watching recently, comprised of the March 2020 low that was later validated as a meaningful level in September 2020 and then again more recently in October.

The next line of resistance to watch is a top-side trend-line extending higher from a peak in June. It’s a sturdy line of resistance given the number of inflection points and cleanliness of each touch and turn. The line is just ahead around 95.50. It isn’t viewed as a strong form of resistance given it is running in the direction of the trend, but should nevertheless be respected.

Another minor level arrives just above the trend-line at 95.71, making the two in confluence for all intents and purposes. This combo could make for a bit of a speedbump even if the DXY is to continue on higher.

Before rising further it is possible we see a test of old resistance that turns it into a new source of support. A small pullback to the 94.67 area could offer would-be longs an opportunity to enter with the trend while having a backstop from which to asses risk and set stops.

Even if the level broke it wouldn’t be an overly concerning event for the upside, but would warrant some caution. The trend still remains pointed higher off the low back in May, and will remain so broadly speaking for as long as the trend-line from May holds and higher highs and higher lows continue to form.

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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.