The US Dollar Index (DXY) continues its bearish trajectory, hovering around the 100.40 mark during Friday’s Asian session. After a brief consolidation earlier in the week, the index has resumed its slide, marking a second consecutive day of declines.
The broader technical outlook remains cautious as the index flirts with the lower boundary of a well-defined descending channel, signaling persistent downside pressure for the greenback. The brokers at Raliplen present a detailed analysis of this topic in the article.
Persistent Bearish Pressure Within Descending Channel
The DXY, which tracks the performance of the US Dollar (USD) against a basket of six major global currencies, has been entrenched in a downward-sloping channel since late March. Currently, the index is testing the lower boundary of this pattern, situated near the psychological support level of 100.50. A sustained break below this region could expose the dollar to further downside risks, especially if bearish momentum accelerates.
The technical setup reinforces this outlook. The nine-day Exponential Moving Average (EMA) is firmly positioned above the current price, hovering around 102.34, underlining the lack of bullish momentum. The index has consistently failed to reclaim this short-term dynamic resistance over the past two weeks, suggesting that sellers remain in control.
Oversold Conditions Hint at Possible Rebound
Despite the prevailing bearish sentiment, not all indicators point toward a continued sell-off. One notable technical signal is the 14-day Relative Strength Index (RSI), which remains deeply entrenched in oversold territory, currently sitting below the 30 level.
Historically, this has often served as a precursor to a short-term corrective rebound, especially when accompanied by a proximity to key support levels.
In such oversold conditions, short-covering or profit-taking by bearish traders could provide temporary relief for the index. However, any bounce is likely to be constrained unless accompanied by fundamental catalysts, such as hawkish Federal Reserve commentary, upbeat macroeconomic data, or broader risk-off sentiment supporting safe-haven flows.
Key Support Levels to Watch
On the downside, immediate attention is centered around the psychological level of 100.00, a major round number that often acts as a natural support due to its psychological significance. A decisive break below this level would bring 99.76 into focus — the lowest point recorded since April 2022. Further downside could expose the next structural support near the 99.00 mark, a level that hasn’t been tested in nearly two years.
Traders should remain cautious, as a breach of 100.00 could accelerate downside momentum and trigger a cascade of stop-loss orders, particularly among long positions accumulated in anticipation of a rebound.
Upside Potential Remains Limited Unless Key Resistance Levels Are Breached
Should the DXY manage to find its footing near the current support zone, the initial upside target lies at the nine-day EMA of 102.34. A break and daily close above this dynamic resistance could potentially signal a shift in short-term momentum.
If confirmed, the next test would likely occur at the upper boundary of the descending channel, currently aligning with the monthly high of 104.37, followed by 104.59, a prior structural resistance zone.
However, a move of this magnitude would likely require a meaningful change in the macro backdrop, including signals of renewed monetary tightening by the Federal Reserve or an uptick in US bond yields, both of which tend to support the dollar.
Macro and Fundamental Backdrop
The decline in the DXY coincides with waning expectations of aggressive Fed tightening, as recent economic indicators have shown signs of cooling inflation and slower labor market momentum. This has led to increasing speculation that the Federal Reserve may be nearing the end of its rate hike cycle or even preparing to pause altogether.
Moreover, broader risk sentiment in global markets has remained relatively constructive, dampening demand for the US Dollar as a safe-haven asset. In such an environment, traders tend to favor risk-sensitive currencies like the euro, pound, or Australian dollar, further weighing on the greenback.
Additionally, global central bank divergence is beginning to reassert influence. The European Central Bank (ECB) and the Bank of England (BoE) have recently reaffirmed their hawkish stances, bolstering their respective currencies and adding to the downward pressure on the DXY.
Conclusion
The US Dollar Index is currently hovering near the critical lower boundary of a descending channel, with downside risks intensifying should it breach the psychological support at 100.00. However, oversold RSI conditions suggest that a corrective bounce cannot be ruled out, especially if short-term technicals trigger a round of profit-taking.
That said, any upside recovery remains contingent on a break above 102.34, the level of the nine-day EMA, and a reclaiming of the channel’s upper boundary near 104.37. In the meantime, traders should brace for potential volatility around the 100.00 handle, which may serve as a key battleground for near-term direction.
COMTEX_465113757/2922/2025-05-01T12:31:17
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