USD Technical Outlook

  • US Dollar Index (DXY) is nearing the important July high
  • Time is also a factor here as we head towards the fall

US Dollar Technical Analysis: DXY Nearing Significant Point in Price, Time

The US Dollar Index (DXY) is nearing the July high at 10929, an important high as the bull cycle looks set to continue. We may not see the dollar break out and run without a set-back, but as we head towards the fall the anticipation is we will see much higher levels.

The timing of this recent round of strength comes as we head towards a weak time of the year for stocks, and with the S&P 500 looking to have already concluded or very near completing a counter-trend summer rally, we could see the resurgence of dollar-on, risk-off in a big way.

The big driver of the DXY is the EUR/USD, accounting for ~57% of the index, and with its initial bounce of parity failing we are seeing parity back in play again. A bounce, likely a smaller iteration this time, could develop in the very near-term, but is seen a likely to fail and lead to levels much lower than parity.

How much lower? The 2000 low at 8231 appears at real risk of being seen in the relatively near future. This would mean a much, much higher DXY of course.

Taking it one step at a time, first thing is first for the DXY – the 10929 high. We may see a failure from there initially, but looking for the pullback to be more of a buying opportunity than a reversal signal.

US Dollar Index (DXY) Daily Chart

dxy daily chart

DXY Chart by TradingView

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—Written by Paul Robinson, Market Analyst

You can follow Paul on Twitter at @PaulRobinsonFX

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