The Dollar Index (DXY) has been trending downwards after encountering resistance around 110.15 in January. Recently, it fell below the 200-day moving average (DMA) of 105 and is approaching the November low of 103.30.
Daily MACD shows a deep negative position, indicating a continued decline; however, there are no signs of a robust recovery yet. If a bounce occurs, resistance may first be encountered at the 105 mark.
Key Support Levels
Should the index drop below 103.30, key support levels are projected at 102.90, 102.60, and 101.90.
The descent of the Dollar Index from its January peak has been steady, highlighting a shift in favour of weakness. Breaking beneath the 200-day moving average strengthens the case for further declines, particularly now that the November low is within reach. That support level of 103.30 will be tested soon enough.
Momentum remains negative, as reflected in the daily MACD, and we do not yet see any technical evidence of a meaningful recovery. While a short-term bounce is possible—perhaps even likely given the oversold conditions—any such move should run into resistance at 105. This means that traders looking for a reversal may need to wait for more concrete signals before assuming the tide is turning.
If the Index does slip below 103.30, there are clear markers on the way down. The first meaningful support sits at 102.90, followed by 102.60. If those levels do not hold, it opens the door to a test of 101.90, a level that would erase much of the prior strength from late 2023.
Trading Implications
In terms of trading implications, sentiment is tilted towards further downside. With MACD firmly in negative territory, traders relying on momentum strategies would likely remain on the bearish side until signs of a reversal appear. Those looking for a rebound must watch for a break back above 105, as failure to clear that hurdle may keep pressure on the currency.
Broadly speaking, caution is warranted for anyone considering long positions. Holding above 103.30 could provide some temporary stability, but until the structure shifts, bearish setups remain more favourable. Weakness persists unless we see a move back toward 105 with conviction and follow-through.
