US Dollar Technical Outlook: Consolidation Within the Downtrend


Technical charts suggest it may be too soon to conclude the end of the global US dollar slide. The recent jump in the greenback appears to be a consolidation/correction within the overall downtrend, at least on the daily charts (relevant for swing/positional traders). While the rebound may have occurred over the past couple of weeks, minor cracks in the US dollar’s decline had been emerging since mid-January (see“US Dollar Technical Outlook: Slide Showing Signs of Fatigue?”, published Jan. 14).

The US dollar index (DXY Index) is holding above solid support on the 89-week moving average (WMA), roughly around the June 2022 low of 101.30, and the lower edge of the Ichimoku cloud on the weekly charts. Asthe previous update highlighted, the 89-WMA has provided support several times in 2019 and 2020. There is quite a strong hurdle at Tuesday’s high of 104.00. A break above the cap could pave the way toward solid resistance at the January high of 105.65, slightly below the 200-day moving average (DMA), now at about 106.50. The index would need to break above the end-November high of 107.20 for the recent rebound to be more than just corrective.

DXY Index Daily Chart



EUR/USD‘s drop below an uptrend line from November confirms that the immediate upward pressure has faded, but not necessarily over. The retreat has taken place from quite a strong resistance on the 89-WMA and the upper edge of the Ichimoku cloud. Having said that, EUR/USD hasn’t broken a price pivot yet on the daily chart. In this regard, the January low of 1.0485 is a vital cushion that coincides with the 200-DMA (now at about 1.0325). Any break below the 1.0325-1.0485 zone would confirm that the broader upward pressure had faded.

EUR/USD Daily Chart



USD/JPY’s break above minor resistance on intraday charts on a horizontal trendline from late January indicates that the downtrend is losing steam in the short term, raising the odds of a range developing in the short term. This follows a rebound from near a fairly strong support area, including, the May 2022 low of 126.30. USD/JPY faces plenty of barriers that could limit the rebound, beginning with the January high of 134.80, and the 200-DMA, near the mid-December high of 138.15.

USD/JPY Daily Chart



While the medium-term outlook for GBP/USD has been improving (becoming less bearish) in recent months (first highlighted in October), the near-term trajectory is less clear given the recent struggle to break past a key ceiling on the 200-DMA. For now, the 1.1800-1.2500 range remains intact (see the most recent update on GBP/USD highlighting the short-term scenario). A decisive break above the upper end of the range would confirm a bullish outlook on the daily chart. On the other hand, a break below the lower end of the range would trigger a minor double top (the December and January highs), potentially opening the way toward 1.1250.

GBP/USD Daily Chart






AUD/USD has nearly met the target of a minor double top pattern (the January and early-February highs) and is now testing a crucial cushion on a horizontal trendline at about 0.6850. This support is key, and any break below 0.6850 could trigger a minor head & shoulders-type pattern that would raise the odds of a drop toward the mid-December low of 0.6625. Immediate support is on the 200-DMA (now at about 0.6800). The higher-tops-higher-bottom pattern since late 2022 suggests that the broader trend remains up (see the recent AUD/USD update), even though the near-term outlook has shifted to neutral.



AUD/USD Daily Chart




Chart Created Using TradingView

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