USD Technical Outlook
- US Dollar Index (DXY) running back into top of long-term range
- Was last month’s reversal temporary or meaningful?
- This current leg will higher on the short-term chart could be the tell
USD Technical Analysis: DXY Running Back into Long-term Levels
The US Dollar Index (DXY) is powering higher again after a large monthly reversal to end May. What made the May reversal significant is that it came on a failed breakout above the 2017 and 2020 highs, potentially making it a meaningful turning point.
This new leg up will be short-lived if the monthly reversal is to hold, as a lower high scenario develops. If this turns out to be the case the picture for the dollar turns bearish in the short to intermediate-term at the least, possibly longer.
On a lower-high rejection around the 2017 high the first level of support will become the recent lows at 101.30, followed by what would end up likely being a lower low towards 100, and worse.
What I will be watching to see if this broader reversal scenario is to play out is if we see the DXY roll over here soon. It is at a pivotal spot here with the 2017 high at 103.82 coming back into play on this swing higher. Should we see, ideally, a sharp turn back lower then a bearish framework should start to develop.
However, if this rise we are seeing now doesn’t develop into a reversal soon then we may see the DXY on the verge of making the May reversal a short-lived one. We would need to see a strong push above 105 for this to be the case.
For now, a sharp turn down from the area around the 2017 high may make for an opportunity for would-be shorts. On the flip-side, it will take a breaking of major resistance before longs hold appeal. If we do see a breakout it could be significant as years of range-bound activity in the DXY comes to an end and gives way to a broader trend higher.
US Dollar Index (DXY) Monthly Chart
US Dollar Index (DXY) Daily Chart
Resources for Forex Traders
Whether you are a new or experienced trader, we have several resources available to help you; indicator for tracking trader sentiment, quarterly trading forecasts, analytical and educational webinars held daily, trading guides to help you improve trading performance, and one specifically for those who are new to forex.
—Written by Paul Robinson, Market Analyst
You can follow Paul on Twitter at@PaulRobinsonFX