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US Dollar Technical Analysis: DXY Up-trend Test Poised to Fail

USD Technical Outlook

  • US Dollar Index (DXY) testing May trend-line
  • Support looks poised to break and lead to more losses
  • Momentum in the EUR was highly unusual

US Dollar Technical Analysis: DXY Up-trend Test Poised to Fail

The US Dollar Index (DXY) reversed with an extreme amount of momentum last week when its largest constituent, the Euro, rallied sharply off its worst levels since June 2020. The recent bout of volatility after an extended move suggests the trend is reversing, at least for the time being.

For now, we will want to respect the trend-line from May as support, but it looks likely to break. For those, though, who are looking at the DXY still through a bullish lens, current support does present a potentially attractive entry point.

But given the momentum of the turn down the anticipation is that we will soon see, perhaps after a slight upward reprieve, a break of support and run lower to another big level around 94.67. The March 2020 low has been in play on a few occasions, with its most recent test coming last month.

A decline to that threshold may provide another floor, but again given the swift up and then down price action we have seen over the past month, a larger decline may be underway that takes the DXY below 94.67 to the rising 200-day moving average (currently at 93.50).

From a tactical standpoint for shorts, if in from higher levels then perhaps taking a wait-and-see approach will prove prudent. For fresh shorts, support is support until it’s not – even if anticipated that it will break. A breaking of support could usher in another round of selling and pave the way for shorts.

US Dollar Index (DXY) Daily Chart

us dollar index, dxy daily chart

DXY Chart by TradingView

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—Written by Paul Robinson, Market Analyst

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