05/15/23 - BOSTON, MA. - U.S. dollar stock photo on May 15, 2023. Photo by Matthew Modoono/Northeastern University

The US dollar, the world’s reserve currency, finds itself at a crossroads in 2024. After a period of dominance in 2023, fueled by rising interest rates and a robust economy, the greenback now faces headwinds from potential policy pivots, slowing growth, and global risk aversion. For currency traders and investors, understanding the key technical levels for USD against major currencies becomes crucial in navigating this uncertain landscape.

This article delves into the technical outlook for USD, identifying critical support and resistance zones across 10 major currency pairs. We’ll explore potential breakout and breakdown scenarios, providing actionable insights for informed trading decisions.

USD’s Technical Trajectory: A Recap of 2023

2023 witnessed a remarkable surge in the USD, driven by the Federal Reserve’s aggressive interest rate hikes to combat inflation. The Dollar Index (DXY), which measures the USD’s strength against a basket of six major currencies, climbed from 96.2 in January to a peak of 114.7 in October, marking a near 20% appreciation. This rally was evident across most major USD pairs, with EUR/USD plunging below parity, USD/JPY breaching the key 150 level, and GBP/USD tumbling to multi-decade lows.

Technical Underpinnings of the USD Rally:

Several technical factors supported the USD’s ascent:

  • Bullish Chart Patterns: Many USD pairs formed ascending triangles and channels, indicating sustained buying pressure and potential breakouts to the upside.
  • Strong Technical Indicators: Key indicators like the Relative Strength Index (RSI) and Moving Average Convergence Divergence (MACD) signaled bullish momentum in most USD pairs.
  • Breakout Confirmations: Decisive breakouts above key resistance levels, like 1.07 in EUR/USD and 145 in USD/JPY, fueled further upside momentum.

Shifting Tides: Challenges for USD in 2024

Despite its dominance in 2023, the USD faces several headwinds in 2024:

  • Potential Fed Pivot: The Fed’s hawkish stance might soften as inflation cools, potentially leading to slower interest rate hikes or even cuts later in the year. This could weaken the USD’s relative yield advantage.
  • Global Growth Slowdown: A looming recession in major economies like Europe could dampen risk appetite, favoring safe-haven currencies like CHF and JPY at the USD’s expense.
  • Geopolitical Tensions: Ongoing conflicts and uncertainties could trigger risk aversion, impacting currency markets and potentially benefiting safe-haven currencies over the USD.

Technical Levels to Watch in 2024:

EUR/USD:

  • Support: 1.0350, 1.0000 (parity), 0.9700
  • Resistance: 1.0700, 1.1000, 1.1400

USD/JPY:

  • Support: 135.00, 130.00, 125.00
  • Resistance: 150.00, 155.00, 160.00

GBP/USD:

  • Support: 1.1800, 1.1500, 1.1200
  • Resistance: 1.2300, 1.2600, 1.3000

USD/CHF:

  • Support: 0.9200, 0.9000, 0.8800
  • Resistance: 0.9800, 1.0000, 1.0200

AUD/USD:

  • Support: 0.6500, 0.6200, 0.6000
  • Resistance: 0.7000, 0.7300, 0.7500

USD/CAD:

  • Support: 1.2300, 1.2000, 1.1800
  • Resistance: 1.3000, 1.3300, 1.3500

NZD/USD:

  • Support: 0.6000, 0.5800, 0.5600
  • Resistance: 0.6500, 0.6800, 0.

Breakout vs. Breakdown Scenarios for USD in 2024

Bullish Breakout Scenarios:

  • USD Rally Extends: If the Fed maintains its hawkish stance and the US economy outperforms expectations, we could see USD break above key resistance levels across most pairs. This scenario is supported by:
    • Continued strong US economic data: A robust labor market and resilient GDP growth could bolster the USD’s relative attractiveness.
    • Escalating geopolitical tensions: Heightened risk aversion could benefit the USD’s safe-haven status.
    • Disappointing performance in other major economies: Weaker growth in Europe or China could push investors towards the USD.

Potential Targets:

  • EUR/USD: 1.1400, 1.2000, 1.2500
  • USD/JPY: 155.00, 160.00, 165.00
  • GBP/USD: 1.2600, 1.3000, 1.3500
  • USD/CAD: 1.3300, 1.3500, 1.3800

Bearish Breakdown Scenarios:

  • USD Correction or Reversal: If the Fed pivots dovish, US growth falters, or global risk sentiment improves, we could see a breakdown in USD strength. This scenario is supported by:
    • Fed rate cuts or slower hikes: This would reduce the USD’s yield advantage compared to other currencies.
    • Global growth recovery: Improved economic prospects in major economies could weaken the USD’s safe-haven appeal.
    • De-escalation of geopolitical tensions: Increased risk appetite could favor riskier currencies over the USD.

Potential Support Levels:

  • EUR/USD: 1.0000 (parity), 0.9700, 0.9500
  • USD/JPY: 130.00, 125.00, 120.00
  • GBP/USD: 1.1500, 1.1200, 1.1000
  • USD/CAD: 1.2000, 1.1800, 1.1500

Trading Strategies:

Trend-Following: Identify the prevailing trend for each pair and trade in the direction of the trend using breakout confirmations or retracements.

  • Support and Resistance: Set entry and exit orders based on key support and resistance levels, aiming to capitalize on potential breakouts or reversals.
  • Technical Indicators: Utilize technical indicators like RSI, MACD, and Bollinger Bands to gauge momentum, overbought/oversold conditions, and potential trend changes.

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