USD Technical Outlook

  • US Dollar Index (DXY) is in position to post a meaningful lower-high if it can’t keep going here
  • If we don’t see a hard turn then a full retest of recent highs and higher could soon be in store

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US Dollar Technical Analysis: At an Important Cross-road

The US Dollar Index (DXY) is at a critical spot and point in time given the recent sharp turn off long-term slope resistance. Momentum is starting to turn back to the downside after a solid rise, and on that the dollar could be in the process of posting a meaningful lower high.

If this is the case then we may see another round of weakness similar to what we just saw recently. It doesn’t necessarily mean that the dollar has turned in the intermediate-term, but there may be an opportunity for traders looking at USD shorts.

Falling back to 109/108 area would of course be a meaningful decline to take advantage of, but within the broader scope of the uptrend it wouldn’t be viewed as damaging. Nothing goes straight up or down.

On the flip-side, the dollar may only dip modestly, or not at all, before running higher to test and possibly break the recent high at 11478. A breakout of that level would be significant given the long-term slope that is in place.

All-in-all, longs are starting to look at risk here coming out of the low last week if we can see a bit more of a turn down here, while would-be shorts who have been looking to take advantage of dollar weakness may gain the upper hand in the days to come.

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US Dollar Index (DXY) Weekly Chart

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US Dollar Index (DXY) Daily Chart

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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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