DXY: How to Trade the Dollar Next Week

by Justin Bennett  · 

May 26, 2023

by Justin Bennett  · 

May 26, 2023

by Justin Bennett  · 

May 26, 2023

The US Dollar Index (DXY) has been on a tear since mid-May.

I remained bullish on the dollar throughout April, given that it was holding above the 100.80 year-to-date low, which is also a massive multi-year demand area.

Since then, we’ve seen an incredible rally from the dollar that isn’t over yet, in my opinion.

Dollar bulls managed to reclaim the 103.50 yearly open this week, which is significant in and of itself.

That alone could indicate a run toward 105.60 in June.

However, there are a few key DXY levels to watch next week that will help you trade other currency pairs like EURUSD, GBPUSD, USDJPY, and others.

The first level is 104.20 resistance.

I’ve had this level on my chart since early March, and sure enough, we’re seeing the dollar index struggle there this week.

That will be a significant hurdle for dollar bulls next week, as it’ll take at least a daily close above 104.20 to flip it to support.

We also have a 4-hour trend line from the May 10th low that was tested a few hours ago.

The trend line above is one to watch next week, as a 4-hour close below could signal weakness and a 103.50 retest.

With that in mind, I wouldn’t be surprised to see the DXY range for a few days between 104.20 and 103.50 next week.

Some consolidation following this month’s rally would be healthy for the dollar.

But a daily and weekly close above 104.20 opens up 105.00 early next week.

The only thing that would turn me bearish on the DXY is a daily close below 103.50.

If that were to occur, it would signal a confirmed fakeout, resulting in a more significant correction toward 103.00 or even 102.00.

But getting bearish on the dollar while above 103.50 is a mistake.

As long as the 103.50 yearly open holds as support, I favor the DXY higher in June toward the 105.60 range highs.

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