USD TECHNICAL OUTLOOK:
- DXY hit resistance via the March 2020 low.
- Friday’s reversal day suggests a little weakness from here.
- Lines and levels to watch in the days ahead.
US DOLLAR TECHNICAL OUTLOOK: CAPPED BY RESISTANCE, FOR NOW
The US Dollar Index (DXY) ran into the pivotal March 2020 low, the trough created during the early days of the pandemic. It was a panicky low that made it an important one. When it was broken a few months later and eventually tested in September 2020 as resistance it became validated as a substantial level of resistance.
This validation continued last month and it appears that was the case once again as of Friday. Whether it turns out to be a meaningful high or not, it’s too early to tell. Some weakness from here is anticipated that will put the DXY on path to at least consolidate some more if it is to eventually break on through.
The key to seeing if the current backing-and-filling is further consolidation prior to a breakout, is seeing price hold the trend-line running up from the May low. As long as that line holds, then the trend off the low remains well intact and the consolidation pattern starting in late September will continue to grow in size.
Should we see the DXY break out either real soon or later after further consolidation, the next top-side objective above 94.67 is the low from July 2020 at 95.71. This could be in confluence with the top-side trend-line firmly in place since June.
Should we see the DXY turn down and test trend-line support, this could offer a nice risk/reward opportunity for would-be longs to enter. On the flip-side, a breakdown below the trend-line doesn’t entirely break the trend off the May low, but it would warrant caution for longs and start giving shorts the upper hand.
US DOLLAR INDEX (DXY) DAILY CHART
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Written by Paul Robinson, Market Analyst, 8th November 2021. DailyFX