US Dollar Index Price Analysis: Range bound price waits for directional clarity
- A long-term technical analysis of the Dollar Index suggests a sideways trend.
- This is likely to continue until a decisive break above or below the range.
- The index is currently meeting resistance from the 100-week Simple Moving Average.
The US Dollar Index (DXY), which measures the strength of the US Dollar (USD) against a basket of trade-weighted competitors, is in a long-term sideways trend which has lasted for between six months and a year.
US Dollar Index: Weekly chart
Within its range-locked consolidation, it is currently meeting resistance after rising up to the 100-week Simple Moving Average (SMA) at 104.71.
There is a possibility it could retreat from this substantial barrier. The 50-week SMA sits not far below at around 103.62 and could provide support.
Prior to the formation of the range the Dollar index’s outlook was more bearish. The index reversed sharply at the September 2022 highs and tumbled. The sharpness and depth of the decline suggested the possibility of a major reversal in the trend, however, DXY found support first at 100.00 and then in the 99.00s before reversing and making a recovery.
Since the index found a floor in 2023 it has been oscillating between the aforementioned lows and a top at roughly 107.00.
It would require a decisive break below 99.56 – the July 2023 lows – to indicate bears were back in the driving seat. Such a move would change the trend to bearish and suggest even lower lows were on the horizon.
Alternatively, a decisive break back above 107.00 would tone the chart more bullishly, and suggest a climb back up to the 114.78 high of 2022.
"Decisive" would mean a weekly candle that broke and closed well away from the range high or low, or three consecutive bearish/bullish weeks that ended well away from the range high or low.
Until either materializes, price is seen continuing its sideways trending pattern.
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