- The US Dollar Index (DXY) has experienced a significant four-week surge, climbing from yearly lows to fresh multi-month highs, reflecting robust dollar strength.
- As the USD approaches critical resistance levels within an established April downtrend, there’s an increasing risk of rally exhaustion or a potential market inflection point.
- Key DXY resistance zones to watch are 104.87/97 (critical), the 105.60s area, and 106.04/11, while support levels lie around 103.70, 102.99, and a crucial 102.35 mark.
The US Dollar has demonstrated remarkable strength this month, with the Dollar Index (DXY) surging by 3.8%. This impressive rally has seen only a single day of decline, propelling the index to levels unseen since July, as observed in today’s New York trading session. This four-week recovery, originating from downtrend support, is now testing trend resistance, setting the stage for a crucial juncture as the month concludes. Traders and investors are keenly observing these developments, particularly in the context of fluctuating currency exchange rates, such as the closely watched 105 Euros To Us Dollars conversion rate, which reflects the dollar’s broader international value. Understanding these technical levels is paramount for navigating the weeks ahead.
US Dollar Price Chart – USD Weekly (DXY) and Implications for Euro to Dollar Exchange
Chart Prepared by Michael Boutros, Sr. Technical Strategist; DXY on TradingView
Technical Analysis: In our previous US Dollar Technical Forecast, we highlighted the DXY’s response to the 2011 support trendline. The subsequent recovery faced initial resistance at the 2023 parallel. The focus then was on whether a breakout from that week’s trading range would provide directional clarity. We emphasized that for a continued bullish outlook, losses should be contained above the yearly-open level. Crucially, a pivot or weekly close above this trendline was deemed necessary to validate the recovery’s strength. The market action since then has been decisive. The index decisively breached resistance in the following week, and this week marks the fourth consecutive week of gains, surging past the 61.8% Fibonacci retracement of the year’s range at 104.08.
It’s noteworthy that this rally has extended beyond 4.4% from the yearly low, with weekly momentum indicators now crossing above the 50 mark for the first time since June. Looking ahead, the immediate point of interest is the potential for the rally to extend towards a confluence of resistance around 104.87/97. This critical zone is defined by the February swing high and the high-week close from July. Market participants should anticipate a significant reaction if the DXY reaches this level, as it could indicate either a temporary pause or a more substantial reversal. This is particularly relevant for those monitoring exchange rates like 105 euros to US dollars, as fluctuations at these DXY levels can directly impact currency valuations.
In terms of support, the initial level to watch on a weekly basis is the 52-week moving average, currently around 103.70. Below this, further support lies at the 2016 high-close and the 2020 high at 102.99. The key support level has now been raised to the March low at 102.35. A break and weekly close below the median-line would be required to signal a resumption of the broader downtrend. Such a scenario would likely influence currency pairs like EUR/USD and the conversion rate of 105 euros to US dollars.
Conversely, a breakout above the current resistance formation would suggest a more significant trend reversal is in progress. This could pave the way for a move towards the 2023 trendline (currently near 105.60s) and then to key resistance at the 2023 and 2024 high-week closes (HWC) in the 106.04/11 area. A sustained move above these levels could signal a longer-term shift in dollar strength, with implications for global currency markets and the value of 105 euros to US dollars.
Bottom Line: The US Dollar’s rebound from downtrend support is now challenging downtrend resistance. We anticipate a significant market reaction in this zone, suggesting the current rally is vulnerable around the 105 level. From a trading perspective, this area presents a potential opportunity to reduce long positions or tighten protective stops. For the bullish scenario to remain intact and suggest a larger trend reversal, losses should ideally be contained above the yearly moving average, and a weekly close above 105 is needed. These technical considerations are crucial not only for DXY traders but also for anyone tracking currency valuations, including the real-world exchange rate of currencies such as 105 euros to US dollars.
Looking ahead, the economic calendar is packed with key data releases next week, including crucial inflation figures and the non-farm payrolls report on Friday, coinciding with the monthly open. Therefore, maintaining a nimble trading approach is advised as we approach the month-end. Monitoring the weekly closes will be essential for gaining further clarity on near-term DXY technical trading levels and their potential impact on currency exchange dynamics. An updated US Dollar Short-term Outlook will be published to provide more granular insights into the evolving DXY technical landscape.
Key Economic Data Releases to Watch
Economic Calendar – Stay informed on the latest economic developments and upcoming event risks that could influence the USD and currency exchange rates like 105 euros to US dollars.
— Written by Michael Boutros, Sr Technical Strategist
Follow Michael on X @MBForex
