US Dollar Short-term Outlook: USD Defends Support at Fresh Yearly Low

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

US Dollar attempts to snap three-week losing streak- defends major trend support
USD monthly / weekly opening-ranges intact- Core PCE tomorrow, NFPs next week
Resistance 101.23/41, 101.73/77 (key), 102.62- Support 100.21 (key), 99.96, 99.59

The US Dollar Index defended major trend support at the yearly lows yesterday with DXY attempting to snap a three-week losing streak. The focus remains on a breakout of the monthly opening-range with the broader short-bias still vulnerable while above the weekly low. Battles lines drawn on the DXY short-term technical charts heading into the monthly cross.

US Dollar Index Price Chart – USD Daily

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

Technical Outlook: In my last USD Short-term Outlook, we noted that DXY had, “rebounded off confluent downtrend support and threatens a larger bear-market correction in the days ahead. The immediate focus is on a breakout of the weekly / monthly opening-ranges for guidance.” It’s been more than two-weeks and the September range remains intact despite an attempted break lower on Tuesday.

Note that pitchfork support has continued to govern the downside here and this range remains a crucial slope-pivot for the Dollar. The immediate focus is on a breakout of the weekly opening-range for guidance with the short-bias vulnerable while above this slope.

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 an embedded descending pitchfork with the index straddling the median-line for the past two-weeks. Initial resistance is eyed at the objective weekly high / 2024 yearly open at 101.23/41 and is backed by the September-open / high-close (HC) at 101.73/77. Ultimately a breach above the upper parallel just higher would be needed to invalidate the June downtrend / suggest a more significant low was registered yesterday.

Support now rests with the monthly low at 100.21- a break / close below this slope would likely fuel a bout of accelerated losses for the greenback with initial objectives eyed at the 2023 low-day close (LDC) at 99.96 and that yearly low at 99.59- look for a larger reaction there IF reached. The next major Fibonacci consideration is eyed at the 61.8% retracement of the 2021 advance at 98.98.

Bottom line: The US Dollar Index has been trading into downtrend support for over a month now and the focus remains on a breakout of the September range for guidance. While a reversal candle off slope support yesterday does threaten a larger near-term recovery here, the broader technical outlook remains weighted to the downside while below the monthly-open. Form a trading standpoint, rallies should be limited to 101.77 IF price is heading lower with a close below 100.21 needed to fuel the next major move.

Note that we get the release of key US inflation data tomorrow with the August Core Personal Consumption Expenditure (PCE) on tap. Watch the weekly close here for guidance and stay nimble into the monthly cross- the next major event risk is slated for Friday with Non-Farm Payrolls next week likely to fuel further volatility here.

Key US Economic Data Releases

Active Short-term Technical Charts

Written by Michael Boutros, Sr Technical Strategist

Follow Michael on X @MBForex

StoneX Financial Ltd (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.

No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.

For further details see our full non-independent research disclaimer and quarterly summary.

CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 69% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money. CFD and Forex Trading are leveraged products and your capital is at risk. They may not be suitable for everyone. Please ensure you fully understand the risks involved by reading our full risk warning.

City Index is a trading name of StoneX Financial Ltd. Head and Registered Office: 1st Floor, Moor House, 120 London Wall, London, EC2Y 5ET. StoneX Financial Ltd is a company registered in England and Wales, number: 05616586. Authorised and regulated by the Financial Conduct Authority. FCA Register Number: 446717.

City Index is a trademark of StoneX Financial Ltd.

The information on this website is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement.