US Dollar Technical Forecast: USD Rip to 20year High at Risk in Days Ahead

2022-07-12 15:30:00

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US Dollar Technical Price Outlook: DXY Weekly Trade Levels
US Dollar Index Price Chart – DXY Weekly
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US Dollar Technical Price Outlook: DXY Weekly Trade Levels

US Dollar technical trade level update – Weekly Chart
USD rally extends towards 20-year highs- exhaustion risk heading into US CPI
DXY weekly support 106.56, 104.88, 103 (key) – Resistance 108.09, 110.25 (key), 111.31

The US Dollar Index ripped to fresh yearly highs this week with DXY surging to levels not seen since October of 2002. The rally is now approaching technical levels of interest and while the broader outlook remains constructive, the bulls will need to stabilize up here to keep the uptrend viable and maintain the momentum needed for a test of uptrend resistance just higher. These are the updated technical targets and invalidation levels that matter on the US Dollar Index weekly price chart. Review my latest Strategy Webinar for an in-depth breakdown of thisDXY technical setup and more.

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US Dollar Index Price Chart – DXY Weekly

Chart Prepared by Michael Boutros, Technical Strategist; US Dollar Index on Tradingview

Notes: In last month’s US Dollar Weekly Price Outlook we noted that DXY had, “responded to uptrend resistance for the second time on building momentum divergence and once again highlights the threat for near-term exhaustion in the index. From a trading standpoint, a good time to reduce portions of long-exposure / raise protective stops – losses should be limited to 101.87/95 IF the index is indeed heading higher on this stretch.” The Dollar fell 2% off those highs in the following weeks with the index registering a low at 103.67 before reversing sharply higher. The rally has now extended for a third consecutive week with the advance now attempting to break uptrend resistance around the 2001 swing low at 108.09. The focus is on the weekly close with respect to this threshodl for guidance.

A topside breach from here keeps the focus on a sliding parallel of the 2011 trendline extending off the 2020 highs (currently ~109.10s) backed by the 78.6% Fibonacci retracement of the 2001 decline at 110.25- look for a larger reaction in price there IF reached. Initial weekly support now rests with the 1989 high at 106.56 backed by the 1999 high at 104.88. Broader bullish invalidation now raise do the 2019 high close at 103.

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Bottom line: The US Dollar rally has accelerated into uptrend resistance and stabilization above 108 is needed to keep the immediate advance viable in the weeks ahead. From a trading standpoint, a good zone to reduce portions of long-exposure / raise protective stops – losses should be limited to the objective monthly open at 104.77 IF price is indeed heading higher on this stretch. Stay nimble into major event risk this week with key US inflation data (CPI) and retail sales on tap. I’ll publish and updated US Dollar Price Outlook once we get further clarity on the short-term DXY technical trade levels.