US dollar price outlook: DXY - FOMC game plan
The dollar is taking a respite after a three-week sell-off crashed through multi-year support. We take a look at the levels that matter on the DXY chart heading into FOMC.
US dollar talking points
- US dollar recovery vulnerable heading into Federal Open Market Committee (FOMC) - risk is lower sub-98.87
- FOMC interest rate decision on tap next week- exhaustion risk
Greenback looks to snap losing streak
The US dollar is attempting to snap a three-week losing streak with the index up just 0.36% mid-week. However, the recovery is likely to be short lived as the broader risk is still weighted to the downside after breaking below multi-year slope support on Friday. These are the updated targets and invalidation levels that matter on the DXY weekly price chart heading into FOMC on Wednesday.
The US Dollar Index tested major uptrend resistance into the start of October trade before making an about-face with the subsequent decline taking out multi-year trendline support last week. We’re looking for topside exhaustion on this recovery with initial resistance eyed at 97.87, as key resistance stands with the 61.8% retracement of the October high-week close at 98.70.
The first major support hurdle is eyed around 96.80, a level where the 61.8% retracement of the yearly range converges on basic trendline support. Keep an eye out for a bigger reaction there if that level is reached. A break below this threshold is needed to validate a larger reversal in the greenback with such a scenario targeting the yearly open at 96.14 and the yearly low-week close at 95.66.
US dollar: the bottom line
A three-week sell-off in the US Dollar Index has broken multi-year uptrend support so we are on the lookout for topside exhaustion with the FOMC interest rate decision on tap next week. From a trading standpoint, we are looking to fade a high below 98.87 with a break below 96.80 needed to show a more significant correction is underway in the currency. Ultimately, a close above 99.43 would be needed to signify a resumption of the broader uptrend.
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