US Dollar Technical Forecast: USD Drops into Critical Support

US Dollar Index Technical Forecast: USD Weekly Trade Levels (DXY)

• US Dollar plunges back into critical support at yearly lows on building divergence
• USD risk for exhaustion / price inflection into July- U.S. Core PCE on tap
• DXY Resistance 99.59/67 (key), 100.98, 102.41/99- Support 97.69-98.39 (key), 96, 94.65/98

The US Dollar plunged more 1.7% off the weekly / monthly highs with DXY trading back into critical support ahead of the June close. While the broader technical outlook is still weighted to the downside, the immediate decline remains vulnerable while above this pivot zone and we’re looking for possible inflection off this threshold in the days ahead. Battle lines drawn on the DXY weekly technical charts heading into July.

Review my latest Weekly Strategy Webinar for an in-depth breakdown of this USD setup and more. Join live on Monday’s at 8:30am EST.

US Dollar Price Chart – USD Weekly (DXY)

Chart Prepared by Michael Boutros, Sr. Technical Strategist; DXY on TradingView

Technical Outlook: In my last US Dollar Technical Forecast we noted that DXY was, “trading just above pivotal support at the yearly lows into the start of the month. From a trading standpoint, the focus is on a breakout of the 97.69-100.68 range for guidance with the broader decline vulnerable while above median-line support.” The index has continued to test critical support for the past three-weeks with the recent two-day sell-off covering the entire monthly range. The DXY is back at support at immediate focus is on possible inflection off 97.69-98.39- a region defined by the 2018 swig high, the yearly swing low, and the 61.8% retracement of the broader 2018 advance. Note that numerous slopes converge on this threshold this week with weekly momentum continuing to flag ongoing divergence into the lows. Looking for a reaction down here at the yearly lows.

Weekly resistance stands at the convergence of the 2023 swing low, the 2019 swing high, and the April low-week close (LWC) at 99.59/67. A breach / weekly close above this threshold would be needed to suggest a more significant low is in place / a larger recovery is underway towards the May high-week close (HWC) at 100.98. Broader bearish invalidation remains with the 38.2% retracement / 2016 high-close / 2020 high 102.41/99.

A break / close below the median-line would be needed to mark downtrend resumption / threaten another bout of accelerated losses for the Dollar. Initial support objectives seen at the 96-handle and the March 2020 low / 100% extension of the 2022 decline at 94.65/98- an area of interest for possible downside exhaustion / price inflection IF reached. Subsequent support seen near the 2016 low at 91.92.

Bottom line: The U.S. Dollar continues to trade just above pivotal support at the yearly lows into close of the month- risk for price inflection off this mark. From a trading standpoint, a good zone to reduce portions of short-exposure / lower protective stops- the immediate focus is on a breakout of the 97.69-99.67 range for guidance with the broader decline vulnerable while above median-line support.

Keep in mind we are heading into the close of the month / quarter with U.S. Personal Consumption Expenditures (the Fed’s preferred inflationary gauge) on tap Friday. Stay nimble into the release and watch the weekly closes here for guidance. Review my latest US Dollar Short-term Outlook for a closer look at the near-term DXY technical trade levels.

Key Economic Data Releases

Economic Calendar - latest economic developments and upcoming event risk.

Active Weekly Technical Charts

• Swiss Franc (USD/CHF)
• Euro (EUR/USD)
• Canadian Dollar (USD/CAD)
• Crude Oil (WTI)
• Gold (XAU/USD)
• Japanese Yen (USD/JPY)
• Australian Dollar (AUD/USD)
• British Pound (GBP/USD)

--- Written by Michael Boutros, Sr Technical Strategist

Follow Michael on X @MBForex