Skip to content

CFDs are complex financial instruments and come with a high risk of losing money rapidly due to leverage. You should consider whether you understand how CFDs work, and whether you can afford to take the high risk of losing your money. CFDs are complex financial instruments and come with a high risk of losing money rapidly due to leverage. You should consider whether you understand how CFDs work, and whether you can afford to take the high risk of losing your money.

USD technical outlook: US dollar rally to gain momentum?

The US Dollar Index has been stuck in an upward grind but could soon gather momentum.

US dollar Source: Bloomberg

Could USD be about to break out?

Looking at the big picture the US dollar has been stuck in a slow upward grind for over a year. It all began following the early 2018 rally. The see-saw price action has made trading difficult as volatility has generally been unfavorable for sustained moves.

Could this be about to change? Perhaps.

There is a clear channel structure on the weekly time frame that connects several peaks from August 2018 until just recently when the US Dollar Index (DXY) backed off from the upper parallel. Right now, another run is trying to be put together towards and, maybe this time, beyond the upper parallel.

Could a rally towards 2017 levels be on the way?

A sustained breakout, meaning a weekly closing candle above the upper parallel, is needed to gain traction. Get outside of the confines of the channel and a rally towards the best levels of 2017 could come during the fourth quarter.

That may be a big ‘if’ though, as the market has been looking for a sustained move in either direction for some time and these big picture set-ups can take longer than anticipated to reach full potential. More patience may be required, but eventually something must give.

If and when the DXY breaks out to the top side, watch for EUR/USD to finally fill the April 2017 election gap at $1.0724. The euro accounts for roughly 57% of the USD index, making it the dominating force among its peer constituents.

US Dollar Index (DXY) weekly chart (watch the upper parallel)

US Dollar Index (DXY) weekly chart Source: TradingView
US Dollar Index (DXY) weekly chart Source: TradingView

This information has been prepared by IG, a trading name of IG Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients.
CFDs are a leveraged products. CFD trading may not be suitable for everyone and can result in losses that exceed your initial deposit, so please ensure that you fully understand the risks involved.

Start trading forex today

Find opportunity on the world’s most-traded – and most-volatile – financial market

  • Trade spreads from just 0.6 points on EUR/USD
  • Analyse with clear, fast charts
  • Speculate wherever you are with our intuitive mobile apps
Find out more

See an FX opportunity?

Try a risk-free trade in your demo account, and see whether you’re onto something.

  • Log in to your demo
  • Try a risk-free trade
  • See whether your hunch pays off
Log in now

See an FX opportunity?

Don’t miss your chance – upgrade to a live account to take advantage.

  • Get spreads from just 0.6 points on popular pairs
  • Analyse and deal seamlessly on fast, intuitive charts
  • See and react to breaking news in-platform
Log in now

See an FX opportunity?

Don’t miss your chance. Log in to take your position.

Take advantage

Live prices on most popular markets

  • Forex
  • Shares
  • Indices

Prices above are subject to our website terms and agreements. Prices are indicative only. All shares prices are delayed by at least 15 mins.

Plan your trading week

Get the week’s market-moving news sent directly to your inbox every Friday. The Week Ahead gives you a full calendar of upcoming economic events, as well as commentary from our expert analysts on the key markets to watch.

For more info on how we might use your data, see our privacy notice and access policy and privacy webpage.

You might be interested in…

<h3>How much does trading cost?</h3>
<h3>Find out about IG</h3>
<h3>Plan your trading</h3>

Find out what charges your trades could incur with our transparent fee structure.

Discover why so many clients choose us, and what makes us a world-leading provider of CFDs.

Stay on top of upcoming market-moving events with our customisable economic calendar.