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US Dollar Technical Forecast: DXY Outlook in Limbo

USD Technical Outlook

  • DXY pullback deepening and bringing to light a vulnerable trend
  • Trend-line support is being put to the test

US Dollar Technical Outlook: DXY Outlook in Limbo

The US Dollar Index (DXY) is still pulling back following a new yearly high reached in the middle of the month. But is this just a pullback or the beginning of a broader decline? It is hard to say yet at this juncture.

The trend since the May low has certainly been wobbly, and at current levels the DXY is no better off than it was two months ago, but that doesn’t mean we won’t see higher levels. There is a trend-line test taking shape right now, but the trend-line isn’t the most robust given its limited connecting points.

If it breaks, it won’t be a significant development. However, the deeper the decline continues to unfold the more likely it is that we are seeing a larger reversal unfold and not a corrective move for the USD that will lead to new yearly highs.

Price action leaves the outlook in limbo, with little to lean on with conviction. For now, it appears prudent to tread with caution until we have more price action to work with. If we see a sharp turn higher soon, that could do the trick for putting the ball back in the buyers’ court.

On the flip-side, a continued slide may set up a countertrend move for would-be sellers to step into to take advantage of further weakness.

US Dollar Index (DXY) Daily Chart

DXY daily chart

DXY Chart by TradingView

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—Written by Paul Robinson, Market Analyst

You can follow Paul on Twitter at @PaulRobinsonFX