US Dollar Technical Analysis: Volatility Rules, Clarity Lacking

US Dollar Technical Analysis: Volatility Rules, Clarity Lacking

USD Technical Outlook

  • US Dollar Index (DXY) volatility and clarity is lacking on direction
  • Trend is higher, may find itself resolving that way soon

US Dollar Technical Analysis: Volatility Rules, Clarity Lacking

The US Dollar Index (DXY) shot higher on Thursday as the Russian invasion of Ukraine got underway, and was hit with another round of major headlines over the weekend. The removal of Russian access to SWIFT and the freezing of CBR assets has led to outsized moves to start the week.

Overall, the impact on the DXY and its largest constituent, the EUR, have has been felt in the Euro trend lower driving up the USD index. The trend for over a year has been higher for the Dollar, with its price action since the end of November being choppy, resulting in a pause in the trend.

It wasn’t an easy handle before Russian/Ukraine tensions boiled over and now it only get more difficult. There will be more market-moving head-lines to come and this makes it extra important we take it one day at a time.

The broader tone for the DXY remains bullish for now and will remain the case as long as trend support can remain intact. There are a couple of recent higher lows and minor higher highs. The most recent higher lows make up a trend-line rising up from May.

The higher highs coupled with the higher lows is leading the DXY towards a development of a wedge. However, for this to fully form as a technical pattern we will likely need to see things calm down. Wedges form as a result of a market becoming increasingly quieter.

For now, the outlook remains tentatively bullish, but again traders will want to take it one day a time when managing risk in this market and be willing to quickly abandon a trading bias when the market signals it prudent to do such. Trading smaller and with defined stops is key to navigating uncertain times like this.

US Dollar Index (DXY) Daily Chart

DXY Chart by TradingView

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—Written by Paul Robinson, Market Analyst

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