Did the US dollar carve a local bottom at the end of 2023?
Today’s video discusses the potential for renewed dollar strength (EURUSD weakness) as we begin a new year.
I’ll discuss key levels and targets for both the DXY and EURUSD.
Watch the video below and scroll down for the annotated charts and analysis.
My last video of 2023 discussed the significance of the DXY 100.85 level.
It served as support for the dollar index in February and April of 2023, before the July fakeout that triggered a 6.5% rally for the DXY.
So we knew 100.85 was a level to watch and it’s precisely why I discussed it at length with VIP members throughout December.
The challenge was (and still is) trying to determine if 100.85 will trigger sustained dollar strength in early 2024 or if the level will fail.
Higher time frame reclaims are one of the best ways to determine that.
If the DXY can close back above the 102.00 region this week, it would confirm a significant reclaim and flip the area back to support.
It would also likely trigger a move toward levels like 102.60, 103.50, and potentially higher.
What does that mean for EURUSD?
A stronger dollar would signal a weaker euro; that much is clear.
And the EURUSD chart is confirming what we’re seeing so far from the DXY.
The euro managed a 1.1000 breakout at the end of 2023.
However, a sustained break back below that mark on the higher time frames would confirm a fakeout and possibly send EURUSD lower.
It’s not all that surprising to see a late-year fakeout, either.
Big moves in the final days of a year or even quarter are often driven by institutions closing their books.
That means moves like the EURUSD rally at the end of 2023 are more administratively driven than conviction driven moves.
But the bottom line is that the DXY needs to close back above 102.00 this week while EURUSD stays below 1.1000.
Do that, and I think we’re likely to see EURUSD trade lower toward 1.0888 and potentially 1.0755.
Holiday SALE! Save 70% on all subscriptions to the Daily Price Action VIP trading group. Limited time offer!
