US Dollar Price Forecast:
US Dollar Price Forecast: DXY Breakout on Hold, Awaiting Catalyst
The US Dollar has been in the driver’s seat following the June FOMC meeting but seasonal market conditions have worked to stall price action. As a result, the Dollar’s breakout has been put on hold and topside progress has ground to a halt. Since little has changed in the fundamental landscape since the initial breakout, the Dollar could look to continue higher if market activity picks up or a catalyst emerges.
US Dollar Basket (DXY) Price Chart: Daily Time Frame (February 2020 – June 2021)
Potential catalysts include the upcoming non-farm payrolls report on Friday along with movements in US Treasury yields. Should jobs added disappoint estimates, the Fed may be forced to walk back its language regarding the pace of rate hikes which could undermine the US Dollar and thrust the pending breakout into uncertainty. Short of such a development, recent price action reveals an encouraging technical picture for the Dollar basket.
US Dollar Basket (DXY) Price Chart: 4 – Hour Time Frame (March 2021 – June 2021)
To that end, recent price action has seen DXY etch out a double bottom pattern that typically precedes price gains. The formation occurred around 91.50 and the Dollar basket has been quick to capitalize in the days since, pushing to its highest level since early last week. With fresh weekly highs established, the next area of resistance likely resides around the index’s June 18 peak at 92.40.
Should the basket break above resistance, bulls could look to continue the charge higher. On the other hand, a failed run at 92.40 could see DXY seek support which may leave the index vulnerable to rangebound price action. In the meantime, follow @PeterHanksFX on Twitter for updates and analysis.
–Written by Peter Hanks, Strategist for DailyFX.com
Contact and follow Peter on Twitter @PeterHanksFX
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