USD Technical Outlook

  • US Dollar Index (DXY) is reversing off July highs
  • Pullback may develop, but overall higher levels anticipated

US Dollar Technical Analysis: DXY Struggling Around Cycle Highs

The US Dollar Index (DXY) made an attempt to break out above the July high following Friday’s powerful reversal higher. Thus far, though, we are seeing the index struggle to gain traction above the summer high. This price action could lead to a pullback before renewed strength carries the DXY firmly to new cycle highs.

If the daily reversal candle currently underway holds through the end of the New York session, then it will make the intra-day high at 10948 an important threshold to watch. We could see the DXY come off a bit or consolidate further before taking out the high.

A pullback may take the DXY back towards the Friday low at 10758, but probably not much lower if we are to soon see a sustained breakout unfold. The worst case scenario, from my viewpoint, is for a return to the trend-line dating to February, but that appears unlikely at this time.

Overall, the outlook is bullish and it will take a sizable shift in price behavior to shake this bias. Stocks look to have completed their summer rally/recovery bounce, and look headed south as we head into the fall. On that, the dollar higher, stocks lower theme is seen to persist and gain considerable momentum.

For the FX centric looking to play equity market weakness, dollar longs should work out well if we get a full-blown stock market sell-off. For those not trading the DXY directly, the EUR makes up ~57% of the index so it will be the big driver.

US Dollar Index (DXY) Daily Chart

us dollar index (dxy) daily chart

DXY Chart by TradingView

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—Written by Paul Robinson, Market Analyst

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