Jump to content

US Dollar Technical Outlook: DXY Sitting Solid Support




  • DXY fell back to support late last week.
  • Trust support until broken.
  • A break is seen as leading to modest selling.

US Dollar Technical Outlook: DXY Sitting Solid Support



In last week’s commentary we discussed how the US Dollar Index (DXY) looked headed higher out of a developing wedge, and that outlook had some legs – for a minute. The wedge breakout quickly failed just ahead of a significant area of resistance (94.67) formed during the early days of the pandemic.

The sharp one-day decline on Wednesday put important support back into play. How things unfold here will be meaningful to the short-term outlook. There is both horizontal and trend-line support in confluence in the area of 93.85 to 93.67.

A peak formed there during August that become support on a pullback early in the month, and so far again it is holding as support. But price action coming off of it isn’t very forceful, but we will respect it as support until it breaks.

A hold above could see the DXY run back towards the recent high at 94.56 up to 94.67 where the much larger level lies. This could make for some rangebound activity that sets up a move later if resistance can’t break.

In the event we see a daily closing candle below 93.67, look for another leg lower to ensue with the next line of support coming via a trend-line dating to the May low. The sloping support was touched numerous times during that bottoming period, then again validated as a trend-line in early September.

It currently lies down just above 93 and rising. This would certainly be an interesting test as the trend since May comes under pressure. If we see weakness to that level then we would want to pay close attention to price momentum.

For the immediate future, would-be and existing longs may want to use support as a spot to assess stops while would-be shorts may want to wait for confirmation of a support break before entering or becoming more aggressive with existing short positions.



dxy daily chart

DXY Chart by TradingView

Resources for Forex Traders

Whether you are a new or experienced trader, we have several resources available to help you; indicator for tracking trader sentiment, quarterly trading forecasts, analytical and educational webinars held daily, trading guides to help you improve trading performance, and one specifically for those who are new to forex.

Written by Paul Robinson, Market Analyst. 18th October 2021. DailyFX


Recommended Comments

There are no comments to display.

Create an account or sign in to comment

You need to be a member in order to leave a comment

Create an account

Sign up for a new account in our community. It's easy!

Register a new account

Sign in

Already have an account? Sign in here.

Sign In Now
  • Blog Statistics

    • Total Blogs
    • Total Entries
  • Latest Forum Topics

  • Our picks

    • How to Manage Fear and Greed in Trading
      Fear and greed are two drivers that influence our everyday lives.
      These influences carry over to trading and can be detrimental.
      Traders can remove these drivers by looking at the big picture and planning ahead.
      • 0 replies
    • The Week Ahead On The Markets
      This week sees Chinese and US CPI, along with the German ZEW index and rate decisions from the RBA and Bank of Canada. Much of the focus remains on the rise in prices globally, but also on the potential spread of the Omicrom variant. Corporate data includes the end of US earnings season, including Oracle, and a trading statement in the UK from Rolls Royce.
      • 0 replies
    • Dividend Adjustments 6th November 2021 - 13th December 2021
      Please see the expected dividend adjustment figures for a number of our major indices for the week commencing 6th December 2021. These are projected dividends and likely to change. IG cannot be held responsible for any changes made.
      Dividends highlighted in red include a special dividend, therefore some or all of the amount will not be adjusted. Amount in brackets is the expected adjustment after special dividends excluded (where shown on major indices). Dividend adjustments due to be posted on a bank holiday will usually be posted on the previous working day. 

      If you have any queries or questions on this please let us know in the comments section below. For further information regarding dividend adjustments, and how they affect  your positions, please take a look at the video.

      • 0 replies
  • Create New...