This article focuses on the technical outlook of U.S. dollar The index and some major forex pairs. If you’re interested in reading the fundamental outlook for the US currency, be sure to request the full Q1 forecast.
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DXY technical analysis
The US dollar, as measured by the DXY index, rose to its best level since November 2022 early in the fourth quarter, but then stopped and unexpectedly turned lower when prices were unable to decisively overcome confluence resistance near 107.3. This technical rejection paved the way for a prolonged sell-off that extended into late December, as shown in the chart below, sending the dollar to its weakest point in more than four months.
Following recent losses, the DXY is exploring a key support area ranging from 102.00 to 101.70 – a period where the key long-term uptrend line is in line with the 50% Fib retracement of the January 2021/September 2022 advance. Maintaining this floor is vital; Failure to do so could amplify the bearish pressure, exposing the 100.75 mark. With further weakness, focus shifts to 99.65, then 99.98, where the 61.8% Fib retracement level converges with the 200-week SMA and July swing lows.
In the event of a bullish reversal from current levels, initial resistance lies around the 50-week simple moving average, but there could be additional gains in store for the USD on a push above this ceiling, with the next area of interest at 104.70. . Overcoming this hurdle will be a huge challenge for the bulls, but a successful breakout could expose trendline resistance at 105.75. With continued strength, a retest of this year’s high should not be ruled out.
US Dollar (DXY) weekly chart
Source: TradingView, prepared by Diego Coleman
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Technical analysis of the EUR/USD pair
After a long sell-off through most of the third quarter, the EUR/USD pair rebounded from trend line support early in the fourth quarter, surpassing its 50-week simple moving average. If the bullish momentum continues into Q1 2024, which seems a reasonable suggestion, resistance will be located at 1.1100/1.1150. Successfully crossing this area will expose the 1.1275 area – the key ceiling where the 2023 high corresponds to the 61.8% Fibonacci retracement of the 2021/2022 low. Subsequent gains could lead to a move to 1.1500, followed by 1.1700.
Conversely, if sentiment turns in favor of sellers and prices head lower, the 50-week SMA will serve as the first line of defense against a bearish attack, followed by confluence support near 1.0630, where the major trend line converges with the 38.2% Fibonacci retracement. . From the September 2022/July 2023 climb. Prices may bottom around these levels on a pullback before returning, but the chances of a drop towards 1.0425 and then 1.0222 will grow in the event of an unexpected breakdown.
Weekly chart of the EUR/USD pair
Source: TradingView, prepared by Diego Coleman
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change in |
Miss |
Shorts |
Amnesty International |
| Daily | -16% | -11% | -12% |
| weekly | -25% | 21% | 3% |
Technical analysis of the USD/JPY pair
The USD/JPY pair retested its 2022 high located near the psychological level of 152.00 in the fourth quarter, but failed to break through it, as sellers aggressively defend this technical barrier and eventually push prices lower, as shown in the chart. Weekly below.
While the pair is still in an uptrend, the fundamental bias could become less positive if the exchange rate falls below the 50-week SMA at 141.00. In such a scenario, prices could gravitate towards the 137.50 level, followed by the 133.20 level – the key Fibonacci threshold. USD/JPY may establish a base in this area on a pullback, but a breakout could lead to a move towards trendline support at 130.00. Looking down, attention turns to the 127.33 area, which represents the 50% retracement of the January 2021/October 2022 high.
Shifting our focus to a bullish outlook, if the bears capitulate and the buyers regain full control of the market, the first line of defense limiting the upside lies at 145.30, with the next ceiling coming in at 148.50. Bulls are likely to face strong resistance in this area, but a successful breakout could push prices towards the peak recorded in 2023. With further strength, all eyes will be on the 15,800 handles.
USD/JPY weekly chart
Source: TradingView, prepared by Diego Coleman
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Technical analysis of GBP/USD
GBP/USD rose in the fourth quarter, reaching its best levels since late August and close to breaching the Fibonacci threshold at 1.2765, suggesting a 61.8% retracement of the 2021/2022 sell-off (as of late December, this ceiling has not yet been set has been violated). Heading into 2024, if cable can climb above this barrier, the focus will be on the 200-week SMA, followed by trendline resistance at 1.2900. With continued strength, buyers could be empowered to start attacking 1.3145 and 1.3500 next.
On the other hand, if the tide turns against the British pound and the US dollar returns, the GBP/USD pair may gradually decline towards technical support at 1.2450, near the 50-week simple moving average. The pound may bottom in this area on the pullback before bouncing, but if prices break this bottom, a drop towards trendline support at 1.2340 is conceivable. With continued weakness, a retest of the October lows could be on the horizon, followed by the 1.1800 level.
GBP/USD weekly chart
Source: TradingView, prepared by Diego Coleman