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USD Technical Analysis: DXY Tight Price Action Suggests Move Coming

USD Technical Analysis: DXY Tight Price Action Suggests Move Coming

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USD Technical Outlook

  • US Dollar Index (DXY) price action coiling up for a move
  • Watch the short-term price action, could have big-picture ramifications

USD Technical Analysis: DXY Tight Price Action Suggests Move Coming

Post-FOMC price action in the DXY has gone dead, moving sideways in extremely tight fashion. In fact, when measuring the short-term range adjusted for current levels of volatility this is the tightest and most persistent weekly range since February.

An unsustainable course of events that should lead to a sharp move here shortly. While confidence in a move is high, the direction in which it will occur is not. A jab lower is looking increasingly likely as we see a reversal in the higher inflation/higher rates trend that has been setting the tone.

This means the Fed day low at 103.41 is seen as likely to come into play very soon, which is also in confluence with a trend-line from the end of last month. Just below there is a slope running up from late March that may get challenged, and given it isn’t the most proven line of support, it could very well break.

It is tricky trading against the broader trend at times, but if the recovery in stocks and bonds continues then the dollar is also likely to remain soft at the least. Should we see the DXY strengthen, however, then look for a wedge break and move above 104.95 to confirm.

In either case, the wedging price action and extreme weekly range we just seen is likely to give-way to a price swing that could bring with it some momentum.

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US Dollar Index (DXY) Daily Chart

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US Dollar Index (DXY) 4-hr Chart

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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.