In this series we scale-back and look at the broader technical picture to gain a bit more perspective on where we are in trend. The US Dollar Index is up nearly 1.5% since the start of the month with the greenback building on the late-January recovery. Price is now approaching resistance levels that could threaten the near-term advance heading deeper into February trade. These are the updated targets and invalidation levels that matter on the DXY weekly chart. Review this week’s Strategy Webinar for an in-depth breakdown of this setup and more.
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DXY Weekly Price Chart (US Dollar Index)
Notes: In last month’s DXY Weekly Technical Outlook our ‘bottom line’ noted that the dollar had, “turned from a multi-year slope inflection with price now threatening a break of below 2018 uptrend support. IF price is indeed heading lower, advances should be capped by 97.42 with a break lower from here targeting the critical support confluence around the 94-handle.”
The index failed to close below the 38.2% line of the descending 2015/2017 pitchfork (blue) with the recovery now testing basic trendline resistance extending off the 2017 & 2018 highs (red). Weekly resistance remains with the high-week close a 97.42 with a breach above key resistance at 97.87 needed to fuel the next leg higher in the Dollar. Yearly open support rests at 95.66 with a break / close below the weekly low-close at 95.62 needed to put the shorts back in control targeting the 200-week moving average / 2018 trendline around ~94.40s.
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Bottom line: The US Dollar rally is approaching levels that could threaten the recovery with the advance at risk ahead of 97.42. From a trading standpoint, a good spot to reduce long-exposure / raise protective stops. We’ll be on the lookout for possible price exhaustion in this region to offer near-term opportunities for a pullback.
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— Written by Michael Boutros, Technical Currency Strategist with DailyFX
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