US Dollar Index Technical Forecast: DXY Weekly Trade Insights
- US Dollar shows resilience, bouncing off critical trend support at the beginning of December
- Upcoming crucial data releases next week with the Federal Reserve interest rate announcement and the PCE inflation report
- DXY resistance levels identified at 107.49, 107.93-108.06 (critical zone), and 108.98 – Key support at 105.78, 104.88-105.05 (significant), and approximately 103.96
The US Dollar is on track for a second consecutive week of gains, having found support at a key trend line as we enter December. The market awaits the outcome of the FOMC rate decision next week, with all indicators suggesting a potential breakout from the current monthly range. The following outlines critical targets and invalidation points on the weekly DXY chart.
Technical Overview: In previous analyses, we highlighted that DXY had surged past the yearly opening-range highs and emphasized that any declines should be contained at the median-line if the index is set to continue higher. Following this, the index climbed sharply to an intraday peak of 108.07 before tapering off towards the end of November. The recent pullback has seen the DXY rebound nearly 1% since the month commenced.
The ongoing monthly opening-range is facing scrutiny, with immediate attention on a potential breakout in the coming days. Initial resistance is projected at the yearly high-week close of 107.49, with additional significant resistance at 107.93-108.06—representing a 100% extension of the 2023 advance alongside the July high-week close. This critical level aligns closely with the 75% parallel line and a breach or close above it is essential to catalyze further gains toward the 61.8% retracement of 2022’s decline located at 108.98.
Weekly support kicks off at the November weekly-reversal close of 105.78, further reinforced by a crucial technical zone at 104.88-105.05, shaped by the July high-week close, February swing high, and the 38.2% retracement of the yearly range. A breach or close below this level could suggest the highs are in place from last month, paving the way for a more pronounced correction toward the 52-week moving average currently near ~103.96.
Conclusion: The US Dollar's rebound from the median-line into December signifies a potentially bullish outlook; however, the risk of deeper corrections remains as long as it stays under the high-week close. The immediate emphasis centers on breaking the December opening-range. From a trading perspective, declines should be capped at the median-line if prices continue to escalate, with a decisive close above 108.06 required to reaffirm the uptrend.
Market participants should brace for the FOMC interest rate decision next week, with widespread anticipation for a 25-basis point takedown. The week concludes with the release of the Fed’s preferred inflation metrics with the Personal Consumption Expenditures report on Friday. Traders are advised to exercise caution leading up to these critical announcements and closely monitor weekly closes for directional guidance.
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--- Analysis by Financial Strategist
