DXY Index Gained, Bullish Rectangle in Focus

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US Dollar, DXY Index, Bullish Rectangle, RSI – Weekly Technical Outlook

  • US Dollar gained this past week, but uptrend did not last
  • However, the weekly and daily setups suggest an upward outlook
  • Will a Bullish Rectangle formation develop on the 4-hour chart?

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US Dollar Technical Forecast – Slightly Bullish

The US dollar aimed higher this past week, but prices could not extend the dominant uptrend. This can be seen by looking at the DXY Dollar Index weekly chart below. Prices have grown since mid-2021 exponentially. In early September, the US dollar left behind resistance at 110.786. Although prices have increased over the past 5 trading sessions, they have not been able to reach the first. However, the broader top focus remains intact. A negative RSI divergence continues, however, showing that upside momentum is fading.

DXY Dollar Index Weekly Chart

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Chart Created in TradingView

DXY Daily Chart

Switching to the daily DXY chart, we can take a closer look at where key resistance is. This appears to be the 110.317 – 110.786 zone. The latter consists of the highs of September 7. Clearing this range would open the door for the uptrend to resume. This exposes the 61.8% and 78.6% Fibonacci extensions at 111.48 and 112.51, respectively. In the event of a turn lower, immediate support appears to be the 109.29 trend point. Further losses later put the focus on the September 13 low at 109.29. This is also where the 50-day Simple Moving Average (SMA) can kick in, maintaining the dominant upper focus. If not, the 100-day SMA would likely be the next key level below.

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Chart Created in TradingView

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DXY 4 Hour Chart

For a more immediate picture of what we could expect in the coming sessions, we can look at the 4-hour chart. The DXY index appears to be trading within the confines of a Bullish Rectangle chart. Clearing the ceiling and confirming the breakout may open the door to an uptrend resumption to 110.786. Otherwise, a row lower puts the focus on 107.68. On balance, the technical stance continues to suggest a cautiously bullish bias.

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Chart Created in TradingView

— Written by Daniel Dubrovsky, Strategist for DailyFX.com

To contact Daniel, use the comments section below or@ddubrovskyFXon Twitter

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