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
DXY Chart by TradingView
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—Written by Paul Robinson, Market Analyst
You can follow Paul on Twitter at@PaulRobinsonFX
DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.