DXY vulnerable in the new year
Technical outlook in USD
- DXY coming out of a corner pattern
- June slope support has been broken
US Dollar Technical Outlook: DXY Vulnerable in New Year
The US Dollar Index (DXY) was in a wedge formation until yesterday, but has yet to close daily below 95.85. This level was created via dips on December 8 and 16, and the fact that they are almost identical in their impressions makes it a solid level.
Although it was breached during the day, we did not see a close below support. This has been a key factor that we have been discussing recently if the wedge is to break on the downside. The fact that the June slope was broken is important, but to see the DXY gain momentum it is considered that it needs 95.85 to break.
Should we see this in the coming days then look for the bottom of the corner to come into play quickly at 95.51. This is only considered minor support and lower levels are likely. The May trendline and the March 2020 low at 94.67 are the next significant levels to watch.
The dollar’s trend has been up for most of the year, so this would be an interesting test to see trend support come in. At that point, if we saw the aforementioned support come into play, we will then be able to observe the price movement to help us give us a better indication of whether a decline is simply corrective in nature or signifies that a larger trend reversal is in progress.
Daily chart of the US dollar index (DXY)
DXY Chart by TradingView
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— Written by Paul Robinson, Market Analyst
You can follow Paul on Twitter at@PaulRobinsonFX