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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.

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)

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