US Dollar Short-term Outlook: USD Trump Bump Extends into Resistance

US Dollar Index Technical Outlook: USD Short-term Trade Levels

• US Dollar post-election rally extends more than 2.7% monthly low
• USD testing key pivot zone near yearly highs- risk for exhaustion / price inflection
• Resistance 106.10/37 (key), 107.00/17, 108- Support 105.63, 104.87/97 (key), ~103.87/89

The US Dollar Index ripped to into resistance near the yearly highs this week with the Trump rally now testing a major pivot zone. While the broader outlook remains constructive, the immediate advance may be vulnerable here and the focus is on possible inflection off this zone in the coming days. Battles lines drawn on the DXY short-term technical charts.

US Dollar Index Price Chart – USD Daily

Chart Prepared by Michael Boutros, Sr. Technical Strategist; DXY on TradingView

Technical Outlook: In last month’s USD Short-term Outlook, we noted that DXY had, “responded to uptrend resistance and threatens a larger pullback within the broader October advance. From a trading standpoint, losses would need to be limited to the median-line (103.42/49) IF price is heading higher on this stretch with a close above 104.87 needed to mark uptrend resumption.”

The index fell more than 1.1% into the monthly cross with USD registering an intraday low at 103.37 before reversing sharply higher on the heels of the US election. The Dollar has now rallied nearly 2.5% since the Trump victory with price testing confluent resistance this week at 106.10/37- a region defined by the 2023 high-week close (HWC) and the 2024 high-day close (HDC). Looking for possible price inflection off this zone with the immediate long-bias vulnerable while below.

US Dollar Index Price Chart – USD 240min  

Chart Prepared by Michael Boutros, Sr. Technical Strategist; DXY on TradingView

Notes: A closer look at USD price action shows the index trading within the confines of an ascending channel with the upper parallel further highlighting key near-term resistance here at 106.10/37. Initial support rests with the May HDC at 105.63 backed by the 104.87/97- a region defined by the July HWC, the objective weekly open, and the February swing high. A break / close below this threshold would suggest a more significant near-term high is in place. Ultimately, a break below the 200-day moving average / 38.2% retracement near 103.87/89 is needed to invalidate the October uptrend / threaten a larger trend reversal.

A topside breach / close above this key pivot zone is needed to fuel the next leg of the advance with subsequent resistance objectives eyed at the 2023 HWC / 2024 HDC at 107.00/17 and the 108-handle- both areas of interest for exhaustion / price inflection IF reached.

Bottom line: The US Dollar breakout has extended into the first major resistance hurdle here and while the broader outlook remains constructive, the immediate advance may be vulnerable below this threshold. From a trading standpoint, a good zone to reduce portions of long-exposure / raise protective stops – losses should be limited to 104.87 IF price is heading for another breakout with a close above 106.37 needed to fuel the next leg of the advance. Review my latest US Dollar Weekly Forecast for a look at the longer-term DXY technical trade levels. 

Key US Economic Data Releases

Economic Calendar - latest economic developments and upcoming event risk.

Active Short-term Technical Charts

• Australian Dollar Short-term Outlook: AUD/USD Bears Go for the Break
• Canadian Dollar Short-term Outlook: USD/CAD Trump Rally Faces Fed
• Gold Short-term Outlook: XAU/USD Plunges on Trump Victory- Fed on Tap
• Swiss Franc Short-term Outlook: USD/CHF Rally Vulnerable into Fed
• Japanese Yen Short-term Outlook: USD/JPY Stalls into US Election, Fed
• British Pound Short-term Outlook: GBP/USD Bears Charge Support
• Euro Short-term Outlook: EUR/USD Rebound Tempts Breakout Ahead of NFP

Written by Michael Boutros, Sr Technical Strategist with FOREX.com

Follow Michael on X @MBForex