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Home Technical Analysis

DXY Trading at Crossroad of Short-term Support

Forex Tips by Forex Tips
October 5, 2020
in Technical Analysis
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USD Technical Outlook:

  • DXY pulling back to confluence of support created since August
  • Short-term outlook hinges on whether it can hold or not

The US Dollar Index (DXY) has been gradually pulling back, and thus far smacks of just a pullback in what has been a decent-looking uptrend off the low in September. It will be important that the index holds here, as a crossroad of support comes into play to start the week.

There is a lower parallel to a channel rising up off last month’s low that is in confluence with horizontal support running over from minor swing-highs dating back to the beginning of August. The crossroad of support is a good test of the uptrend we’ve recently seen.

A hold and turn higher is seen as continuing the trend up to at the least, and potentially beyond, the March coronavirus low/March top trend-line that helped induce this most recent bout of weakness. But a break of support and the outlook will quickly shift towards a test of the 2011 trend-line, where support is much more meaningful.

For now, the outlook is still tentatively bullish with the gradual decline into support, but it needs to hold right here. This makes the current spot, from where I sit, a potentially attractive risk/reward spot for would-be longs. For would-be shorts, this same line-in-the-sand can be used to determine whether the recent pullback will morph into an outright decline.

Both sides have levels not too far away to think about depending on things play out at support this week. A rally will quickly have price up against the March low, while further selling will be quickly met by the 2011 trend-line. Both spots we will want to pay close attention to how price action plays out at those respective thresholds.

USD Forecast

USD Forecast

Recommended by Paul Robinson

Check out the Q4 USD Forecast

US Dollar Index (DXY) Daily Chart (sitting at confluent support)

US Dollar Index (DXY) daily chart

U.S. Dollar Currency Index (DXY) Chart by TradingView

Resources for Forex Traders

Whether you are a new or experienced trader, we have several resources available to help you; indicator for tracking trader sentiment, quarterly trading forecasts, analytical and educational webinars held daily, trading guides to help you improve trading performance, and one specifically for those who are new to forex.

—Written by Paul Robinson, Market Analyst

You can follow Paul on Twitter at @PaulRobinsonFX





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