US Dollar Technical Forecast: USD Plunges to Critical Support

US Dollar Index Technical Forecast: USD Weekly Trade Levels (DXY)

US Dollar reversal off uptrend resistance plunges for five of the past six-weeks
USD bears vulnerable into confluent uptrend support– U.S. 4Q GDP, PCE on tap
DXY Resistance 108.52, 109.40m 110.17 (key)- Support 106.04/35 (key), 104.87/98, 103.98

The US Dollar is poised to mark a third consecutive weekly decline with DXY plunging nearly 3.5% off the yearly high. A reversal off uptrend resistance is now testing trend support and the focus is on possible exhaustion / price inflection off this mark tin the weeks ahead. Battle lines drawn on the DXY weekly technical charts heading into the close of February.

Review my latest Weekly Strategy Webinar for an in-depth breakdown of this USD setup and more. Join live on Monday’s at 8:30am EST (sessions return April 28).

US Dollar Price Chart – USD Weekly (DXY)

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

Technical Outlook: In my last US Dollar Technical Forecast we noted that, “The US Dollar exhausted into uptrend resistance last month and the threat remains for a deeper correction within the broader uptrend- looking for a possible exhaustion low in the weeks ahead. From at trading standpoint, losses should be limited to the median-line IF price is head higher on this stretch with a close above the 2012 parallel needed to fuel the next major leg of the advance.”

The index has now plunged more than 3.2% off those weekly highs with the decline testing key support this week at the median-line. The immediate focus is on possible inflection off this mark with bears vulnerable near-term while above this slope.

Yearly-open resistance stands at 108.53 and is backed by the objective 2025 high-week close (HWC) at 109.40. Ultimately a breach / weekly close above the 2012 parallel / swing highs at 110.17 would be needed to mark uptrend resumption / fuel the next major leg of the advance.

A break below this key pivot zone would suggest a more significant high was registered last month / a larger trend reversal is underway with the next major technical consideration seen at 104.87/97- a region defined by the 2024 February high, the July (HWC) and the 52-week moving average. Look for a larger reaction there IF reached. Subsequent support seen near the 61.8% retracement at 103.98 with broader bullish invalidation steady at 103.

Bottom line: A reversal off uptrend resistance is now testing the trend support- looking for a reaction into 106.04/35. From a trading standpoint, a good zone to reduce portions of short-exposure / lower protective stops- rallies should be limited to the yearly open IF price is heading lower on this stretch with a close below 106.04 needed to fuel the next leg of the decline.

Keep in mind we are heading into the close of the month with U.S. 4Q GDP and Core Personal Consumption Expenditures (PCE) on tap next week. Stay nimble into the release and watch the weekly closes here for guidance. Review my latest US Dollar Short-term Outlook for closer look at the near-term DXY technical trade levels.

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--- Written by Michael Boutros, Sr Technical Strategist

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