USD technical outlook
- US Dollar Index (DXY) Inverted Head and Shoulders Pattern
- EUR / USD rolls over, challenging the March trend line
USD pattern, trend line break would be bullish
The US Dollar Index (DXY) is about to get higher as it tries to get out of an inverse head-and-shoulders (H&S) formation. Adding extra weight to the meaning of this pattern is the March trendline merging with the neckline of the H&S pattern.
At this point the price is starting to rise above the confluent threshold, and should it close tightly there today (or very soon if hit back lower in the short term), the bullish trading bias will continue to gain traction.
The first major level to watch during a breakaway will arrive at the September 1 low at 91.74, and will be a significant threshold to cross as the rally reverses the measured movement implied by the depth of the reverse. head-and-shoulders. That move would be about 92.50 or higher.
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US Dollar Index (DXY) daily chart (inverse H&S)
DXY chart by TradingView
As the DXY moves higher, the most heavily weighted constituent of the index, the EUR (57.6%), drops. The “anti-dollar”. It’s also rolling down a head-and-shoulder-like pattern, and it even broke a little bear flag recently.
This has the May trendline in focus, which is the equivalent of DXY’s March trendline. A break below is seen as a possible acceleration of the movement lower if the September 1 high, which is nearing merging, could also break.
A breakdown below 12011 is seen as the actual level to trade below to increase the odds in favor of sellers. Maintaining support would not necessarily make the outlook optimistic, but it would be wise to at least take a neutral stance. Support is support until it breaks. Making the picture bullish requires some work.
EUR / USD 4-hour chart (12011 support)
EUR / USD chart by TradingView
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— Written by Paul Robinson, Market Analyst
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