US Dollar Short-term Outlook: USD Holds Key Support Before NFPs

US Dollar Index Technical Outlook: USD Short-term Trade Levels

• US Dollar plunges nearly 3.56% off May high- now testing critical support at yearly lows
• USD weekly opening-range intact heading into Non-Farm Payrolls tomorrow
• Resistance 98.93, 99.41/58 (key), 100.35/59- Support 97.71-98.39 (key), 97, 96

The US Dollar Index is testing a major pivot zone early in the month with the weekly rang intact ahead of NFPs- bears on notice. Battles lines drawn for the bulls on the DXY short-term technical charts.

US Dollar Index Price Chart – USD Daily

Chart Prepared by Michael Boutros, Sr. Technical Strategist; DXY on TradingView

Technical Outlook: In my last US Dollar Short-term Outlook we noted that DXY had broken below the April uptrend and that, “From a trading standpoint, rallies would need to be limited to 100.65 IF the index is heading lower on this stretch with a close below 99.40 needed to fuel the next leg of the decline.” The index briefly registered an intraday high at 100.54 later that week before reversing sharply with a decline of nearly 3.6% now testing a pivotal support zone. The focus is on a reaction off this mark with building momentum divergence suggesting the immediate decline may be vulnerable heading into NFPs tomorrow.

US Dollar Index Price Chart – USD 240min  

Chart Prepared by Michael Boutros, Sr. Technical Strategist; DXY on TradingView

Notes: A closer look at USD price action shows the index holding within the weekly opening-range heading into the close of trade on Thursday. Initial resistance is eyed with the May low-day close (LDC) at 98.93 and is backed by near-term bearish invalidation at 99.41/58- a region defined by the weekly / monthly open and the 2023 swing low. Note that the February channel line converges on this threshold into the close of the week and a breach / close above would be needed to suggest a more significant low is in place / a larger reversal is underway.

Critical support rest at 97.71-98.39- a region defined by the 2018 swing high, the April lows, and the 61.8% retracement of the broader 2018 advance. A break / close below this threshold is needed to mark downtrend resumption and would threaten another bout of accelerated declines towards the 97 & 96-handles. The next major technical consideration rests with the March 2020 low / 2022 low / 100% extension of the 2022 decline at 94.63/98- look for a larger reaction there IF reached.

Bottom line: The U.S. Dollar has is testing critical support at the yearly lows with the weekly opening-range intact heading into tomorrow’s employment report. The immediate focus is on a breakout of this range with the broader short bias vulnerable while above the yearly low. From a trading standpoint, rallies would need to be limited to 99.57 IF price is heading lower on this stretch with a close below 97.71 needed to fuel the next major leg of the decline.

Keep in mind U.S. Non-Farm Payrolls are on tap tomorrow morning with key inflation data (CPI) slated for next week. Stay nimble into the releases and watch the weekly closes here for guidance. Review my latest US Dollar Weekly Forecast for a closer look at the longer-term DXY technical trade levels. 

Key US Economic Data Releases

Economic Calendar - latest economic developments and upcoming event risk.

Active Short-term Technical Charts

• British Pound Short-term Outlook: GBP/USD Bulls Eye Breakout
• Australian Dollar Short-term Outlook: AUD/USD Poised for Breakout
• Euro Short-term Outlook: EUR/USD Coils Below Resistance Ahead of ECB, NFP
• Swiss Franc Short-term Outlook: USD/CHF Bulls Emerge at Support
• Gold Short-term Outlook: XAU/USD Poised for June Breakout
• Japanese Yen Short-term Outlook: USD/JPY Retreats from Resistance
• Canadian Dollar Short-term Outlook: USD/CAD Reversal Risk Builds

Written by Michael Boutros, Sr Technical Strategist with FOREX.com

Follow Michael on X @MBForex