US Dollar Technical Forecast for the Week Ahead

USD Technical Outlook: Bullish

  • US Dollar Index (DXY) rally could fade in the days ahead
  • Another leg lower will bring into play important trend support

US Dollar Technical Forecast for the Week Ahead

 

The US Dollar Index (DXY) came off hard last week as bonds and stocks rallied. As we head into a new week the focus will be on whether this theme can continue or not. The thinking is that we will see it continue and thus any rally that develops in the dollar for now will fade.

 

If the DXY can rally up to 111.77 there is a bit of resistance as the low of the range that proceeded last week’s decline comes into play.

 

On the downside the big technical threshold to watch is the trend-line from February. It lies not far beneath the swing-low at 109.63. The high from July is in that vicinity too. The parallel of the line off the highs is down there as well, but it is unproven so at this time regarded as only a possible level of support in need of validation.

 

A drop into trend support may end the decline for the dollar, but if we are to see a broader recovery in bonds (lower rates) and stocks then the dollar is also likely coming off even more that just to trend support. If this is the case then the trend-line may not hold, and support down at 107.68 may come into play.

 

But we will first need to see how price action plays out. A drop onto trend support and reversal will skew risk back to the upside. Overall, for now, the thinking is more downward pressure and a rally from here will fail, but we will need to be nimble as the outlook isn’t as clear as it was a week ago.

US Dollar (DXY) Daily Chart

 

Chart, histogram  Description automatically generated

 

US Dollar Index (DXY) Chart by TradingView

 

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