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US Dollar Technical Analysis: DXY Trend Trying to Reassert Itself

US Dollar Technical Analysis: DXY Trend Trying to Reassert Itself

Paul Robinson, Strategist

USD Technical Outlook

  • US Dollar Index (DXY) passed important trend test
  • May look to reassert uptrend from last year

US Dollar Technical Analysis: DXY Trend Trying to Reassert Itself

The US Dollar Index (DXY) passed an important trend test last week when it held the trend-line from the May low. The forceful turn higher on the second test in a matter of a few days further cemented that line as one to keep an eye on moving forward.

Stay above the trend-line and the trading bias is neutral to bullish. At this juncture to flip the bias to the short side it would require a break below the trend-line and daily close below 95.13. If that were the case then a move to big support around 94.67 would become likely, or worse.

But if we see support stay intact, and if risk sentiment continues to weaken (which is looking increasingly likely as indices continue to demonstrate bearish price action), then we could see the DXY trade back to a new cycle high above 97.44.

A break above the Jan high would have levels in play from the first half of 2020, when markets were reacting strongly to the onset of the pandemic. Higher levels would be consistent with the relatively persistent trend since the first half of last year.

For now, from a tactical standpoint staying the course of higher levels is preferred, but have to be careful not to get caught up chasing price higher if it starts to run. A reaction may allow would-be longs an opportunity to enter with good risk/reward. For those who may have gotten in at lower levels, using the trend-line as a line-in-the-sand for risk makes sense. Given the above perspective shorts don’t make sense until we see support falter.

US Dollar Index (DXY) Daily Chart

DXY daily chart

DXY Chart by TradingView

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Whether you are a new or experienced trader, we have several resources available to help you; indicator for tracking trader sentiment, quarterly trading forecasts, analytical and educational webinars held daily, trading guides to help you improve trading performance, and one specifically for those who are new to forex.

---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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