In light of recent developments in global markets, the U.S. Dollar Index (DXY) remains at the center of discussion among analysts and investors, facing a fragile balance between bearish expectations and short-term technical corrections.
The index holding steady at the 97.00 level highlights the psychological importance of this support as the first line of defense against renewed selling pressure.
However, the continued movement within a descending channel and the weakening short-term momentum raise questions about the dollarโs ability to maintain this stability for long.
The nine-day exponential moving average (EMA) at 97.32 remains a key barrier to any upward attempt, making it a critical near-term test.
A clear daily close above this level could restore gradual confidence and raise the odds of targeting the upper boundary of the descending channel at 97.90, which aligns closely with the 50-day EMA at 98.03. While this scenario is possible, it remains conditional on a tangible improvement in market sentiment and stronger-than-expected U.S. economic data. Should the index fail to break through 97.32, the dollar could quickly come under renewed pressure, retesting 96.22, and possibly 95.10 at the lower channel support.
Another factor that cannot be overlooked is the 14-day Relative Strength Index (RSI), which currently sits below 50. This clearly signals the dominance of bearish bias in the dollarโs movements, and suggests that any rebound at this stage will likely be fragile and short-lived unless accompanied by genuine improvements in macroeconomic indicators or a shift in monetary policy. The weak technical momentum is further compounded by heightened anticipation in global markets over the U.S. interest rate path, leaving the dollar more vulnerable to intraday volatility sparked by data releases and official statements.
The Federal Reserveโs recent decision to cut interest rates by 25 basis points marked a pivotal event for dollar price action. While markets had long anticipated this move, its arrival after nine months of waiting gave it an amplified impact on investor sentiment. The sharp decline in the Dollar Index to its lowest level in 43 months reflects how markets interpreted the cut as the beginning of a new phase of monetary easingโespecially as traders are already pricing in further rate cuts in the coming months.
Yet the balancing factor came through remarks from Federal Reserve Chair Jerome Powell, who stressed that rate cuts are not a pre-programmed path but remain dependent on economic data. This cautious message was enough to halt the dollarโs rapid decline and lift it off recent lows. In other words, Powell sought to realign market expectations, ensuring they do not overcommit to the idea of a prolonged easing cycle. This tension between what markets want and what the Fed signals will remain the key determinant of the dollarโs direction in the weeks ahead.
From my perspective, the most likely short-term scenario is continued range-bound trading, with 97.00 acting as primary support and 97.32 as the immediate resistance. This range reflects the tug-of-war between fundamentals and technicals. If upcoming U.S. economic dataโsuch as inflation or labour market figuresโfalls short of expectations, the dollar could lose its 97.00 support and slide quickly to lower levels. Conversely, stronger data could allow the index to test 97.90 and possibly 98.03.
Over the medium term, I expect bearish bias to dominate as long as the Fed continues its rate-cutting cycle, even if gradual. Successive cuts, even if modest, exert structural pressure on U.S. bond yields, diminishing the dollarโs appeal as a safe-haven currency relative to others like the euro or yen. However, the element of surprise always remains, as Fed officials can shift their rhetoric swiftly if stronger signs of inflation recovery or slower economic weakening emerge.
In summary, the U.S. Dollar Index is in a temporary balance between structural bearish pressures and limited technical corrections. The 97.00 psychological level forms the first line of support, while the nine-day EMA at 97.32 serves as the immediate test for bullish traders. Any decisive break of this rangeโup or downโwill determine the indexโs next direction. Amid continued uncertainty surrounding Fed policy and the global economy, caution remains the most rational stance for investors and traders until the contours of the next economic cycle become clearer.
Technical analysis ofย dollar index ( DXY ) prices
The U.S. Dollar Index (DXY) on the four-hour chart shows that the index is currently moving within a corrective range following the sharp decline that brought it to approximately the 96.80 level. The price rebound from this level coincided with the index entering an oversold area on the Stochastic indicator, which increased the likelihood of a short-term technical upward retracement. However, the current upward movement appears limited within the framework of the technical correction and does not signal the start of a sustained uptrend.
Leave a Comment