USD 1Q Forecast: US Dollar Breaks Multi-year Trend Support – Looking for a Low
DXY Price Chart
Chart prepared by Michael Boutros, created with TradingView
One of the most significant technical reactions this past year was in the US Dollar[1] Index. For years now we’ve been tracking the 2011 support trendline with parallels of this slope defining every major turn in the Dollar since the 2014 breakout. A test of the upper parallel / 2016 high-close at 102.99 during the height of the Covid crisis in March was followed by a massive yearly opening-range reversal with the July break below the 2018 parallel fueling a decline to multi-year lows in August.
The 2011 trendline held for three months before crashing lower in November. This breakdown constitutes the first major break for the multi-year upsloping Dollar support. Initial support is eyed at the 88.6% retracement of the 2018 advance at 89.93 backed by the 2010 high at 88.70 and the 50% retracement / 2018 low at 88.18/25. Resistance stands at 92.28 backed by former slope support– ultimately a breach above the March low at 94.65 would be needed to suggest a more significant low is in place. Bottom line, the risk is weighted to the downside heading into the start of the year but we’ll be on the lookout for a possible low in the second / third quarter closer to slope support.
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