US Dollar Weekly Price Outlook: DXY Rally Faces Moment Of Truth

In this series, we scale-back and look at the broader technical picture to gain a bit more perspective on where we are in trend. The US Dollar Index is up nearly 1.5% since the start of the month with the greenback building on the late-January recovery. Price is now approaching resistance levels that could threaten the near-term advance heading deeper into February trade. These are the updated targets and invalidation levels that matter on the DXY weekly chart. 

DXY WEEKLY PRICE CHART (US DOLLAR INDEX)

(Click on image to enlarge)

DXY Price Chart - US Dollar Index Weekly

Notes: In last month’s DXY Weekly Technical Outlook our ‘bottom line’ noted that the dollar had, “turned from a multi-year slope inflection with price now threatening a break of below 2018 uptrend support. IF price is indeed heading lower, advances should be capped by 97.42 with a break lower from here targeting the critical support confluence around the 94-handle.”

The index failed to close below the 38.2% line of the descending 2015/2017 pitchfork (blue) with the recovery now testing basic trendline resistance extending off the 2017 & 2018 highs (red). Weekly resistance remains with the high-week close a 97.42 with a breach above key resistance at 97.87 needed to fuel the next leg higher in the Dollar. Yearly open support rests at 95.66 with a break / close below the weekly low-close at 95.62 needed to put the shorts back in control targeting the 200-week moving average / 2018 trendline around ~94.40s.

Bottom line: The US Dollar rally is approaching levels that could threaten the recovery with the advance at risk ahead of 97.42. From a trading standpoint, a good spot to reduce long-exposure/raise protective stops. We’ll be on the lookout for possible price exhaustion in this region to offer near-term opportunities for a pullback.

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