US Dollar Technical Analysis: DXY Support, Short-term Pattern in Focus
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USD Technical Outlook:
- US Dollar Index (DXY) is coming off trend support but may fail
- Watching wedge pattern on 4-hr chart developing off support
US Dollar Technical Analysis: DXY Bounce at Risk of Failure
Last week the DXY came off support rather strongly, but right after doing so the price action immediately became choppy. The bounce from support is good so far, but we can’t rule out the possibility it is only just that – a bounce within the context of a larger corrective sequence.
The past few sessions are bringing into focus a wedge on the 4-hr chart, and with it occurring within a downtrend off the July high it could lead to another leg lower. It of course could end up triggering higher as well. A day or two more of filling out the pattern will help bring clarity.
Should we see the downside trigger and the trend-line from the end of March fail, last week’s low which occurred at the May high of 105 will become very important for the near-term outlook. A sustained break below 105 will shift the focus towards a larger correction in the USD rally.
The next level of support to look at on a drop below support clocks in at 10342, a swing low created during June. Beneath there you have to go down to around 10130 to find solid support.
But before looking at the downside scenario we should continue to respect support until broken. In the event we see the DXY squeeze higher (>106.93) then a crossing of recent resistance around 10742 will have the index looking at the July high at 10929.
US Dollar Index (DXY) Daily Chart
US Dollar Index (DXY) 4-hr 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.