The US Dollar Index (DXY), a crucial gauge that tracks the performance of the US Dollar against a basket of six major currencies, has been facing headwinds in recent trading sessions. As of Friday’s Asian trading hours, the index was lingering around 100.40, extending its decline for the second consecutive day. This downward movement has put the DXY in a vulnerable position, with its technical outlook on the daily chart painting a rather bearish picture.
Testing the Lower Limits of the Descending Channel
The DXY is currently testing the lower boundary of a well – defined descending channel. This channel has been a key feature in the index’s price action, and the current test of its lower limit has market watchers on high alert. A sustained break below this boundary could potentially signal a further downward spiral for the US Dollar Index, leading to more weakness in the US Dollar against its major counterparts.
RSI Hints at a Possible Rebound
Despite the overall bearish sentiment surrounding the DXY, there are some glimmers of hope for a short – term recovery. The 14 – day Relative Strength Index (RSI) is currently below 30, which is considered an oversold territory. Historically, when the RSI reaches such low levels, it often indicates that the market is due for a corrective rebound. In this case, it suggests that the US Dollar Index might be on the verge of a short – term upward movement, although the broader bearish trend could still resume after the potential correction.
Weak Short – Term Momentum and Key Support Levels
Adding to the concerns for the US Dollar Index is its position relative to the nine – day Exponential Moving Average (EMA). The DXY is trading well below this EMA, a clear sign of weak short – term momentum. This means that in the near term, the path of least resistance for the index remains downward.
Looking at the support levels, the first line of defense is at the psychologically important level of 100.00. If this level is breached, the next significant support lies at 99.76, which is the lowest level the index has reached since April 2022. Further down, there is additional support near the 99.00 mark. A break below these levels could open the floodgates for more significant losses for the US Dollar Index.
Resistance Levels and the Road to Recovery
On the upside, if the US Dollar Index manages to stage a comeback, the first hurdle it will need to overcome is the nine – day EMA, currently positioned at 102.34. A decisive move above this level could provide a much – needed boost to the short – term bullish momentum. If the upward movement continues, the index could then set its sights on the key resistance zone near the upper boundary of the descending channel. This resistance zone is located at the monthly high of 104.37, and a break above this level would likely be followed by a test of 104.59. However, given the current bearish trend, achieving these upside targets will not be an easy feat.
US Dollar Index: A Closer Look at the Daily Chart
A glance at the daily chart of the US Dollar Index reveals the magnitude of its recent decline. With a current price of 100.51, a daily change of -0.43 (-0.42%), and a 14 – day RSI of 27.69, the index is clearly in a downward spiral for now. The nine – day EMA at 102.37 and the 50 – day EMA at 104.60 further illustrate the uphill battle the DXY faces in reversing its current trend. Traders and investors will be closely monitoring these levels in the coming sessions to gauge the future direction of the US Dollar Index.
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