US Dollar Technical Forecast: Trump Tariff Delay Halts USD Rally

US Dollar Index Technical Forecast: USD Weekly Trade Levels (DXY)

• US Dollar rally fails third attempt to mount long-term slope resistance- February opening-range in focus
• USD bulls vulnerable after Trump tariff decision – U.S. Non-Farm Payrolls on tap
• DXY Resistance 109.64 (key), 111.53, 112.12- Support 107.49, 106.35 (key), 104.87/98

The US Dollar is virtually unchanged since the start of the week despite a range of more than 1.4%. Concerns over the impending Trump Tariffs fueled an early week rally that quickly reversed on news of a 30-day stay for both Mexico and Canada. While the broader outlook remains constructive, the bulls are still vulnerable here to a deeper correction within the broader uptrend. Battle lines drawn on the DXY weekly technical charts heading into February trade.

US Dollar Price Chart – USD Weekly (DXY)

Chart Prepared by Michael Boutros, Sr. Technical Strategist; 

Technical Outlook: In last month’s US Dollar Technical Forecast we noted that a, “six-week rally takes the US Dollar towards uptrend resistance early in the month. From a trading standpoint, look to reduce long-exposure / raise protective stops on a rally towards the upper parallel…” The index exhausted into the 2012 parallel (red) later that week before pulling back more than 2.9%. A second attempt to mount this slope failed into the weekly / February open and leaves the broader uptrend vulnerable early in the month.  

Initial weekly support rests with the November high-week close (HWC) at 107.49 and is backed by the 38.2% retracement of the September rally at 106.35- note that the median-line converges on this threshold and a break / close below this slope would suggest a more significant high was registered last month / a larger trend reversal is underway. Broader bullish invalidation now set to the July HWC / February high / 52-week moving average at 104.87/97.

Weekly resistance now eyed with the yearly high-close at 109.64 with a breach / close above the 2012 parallel needed to fuel the next major leg of the advance. Subsequent resistance objectives eyed at the 78.6% retracement of the 2022 decline at 111.53 and the 2023 HWC at 112.12- both levels of interest for possible topside exhaustion / price inflection IF reached.

Bottom line: The US Dollar exhausted into uptrend resistance last month and the threat remains for a deeper correction within the broader uptrend- looking for a possible exhaustion low in the weeks ahead. From at trading standpoint, losses should be limited to the median-line IF price is head higher on this stretch with a close above the 2012 parallel needed to fuel the next major leg of the advance.

Keep in mind we are in the early throws of the February opening-range with U.S. Non-Farm Payrolls on tap Friday. Stay nimble into the release and watch the weekly closes here for guidance. Review my latest US Dollar Short-term Outlook for closer look at the near-term DXY technical trade levels.

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--- Written by Michael Boutros, Sr Technical Strategist

Follow Michael on X @MBForex