The US Dollar Index (DXY) continues to exhibit a bearish tone for the second consecutive day, extending its pullback from monthly highs. Despite this negative bias, however, the lack of aggressive selling pressure indicates a market still awaiting stronger confirmation before deeper declines unfold.
Currently, the DXY trades just above 100.70, representing a marginal daily loss of 0.10%, and critically, it remains perched above the 200-period Simple Moving Average (SMA) on the 4-hour chart (H4) — a level that has emerged as a key technical inflection point.
Tandexo analysts take a deep dive into the topic in this article.
Technical Outlook: Bearish Setup Developing
The DXY’s position near the 200-period SMA on H4, currently aligned with the 100.50 support zone, is drawing close scrutiny. A decisive break below this moving average would constitute a strong technical sell signal, validating a deeper corrective phase for the Greenback. From a chart perspective, the near-term structure is increasingly bearish, with momentum oscillators on both the hourly and daily timeframes signaling weakening upside momentum.
A sustained move below 100.50 would mark a breakdown of a key support floor, thereby exposing the DXY to further downside. The next level of interest would be the 100.00 psychological mark, which coincides with the weekly swing low touched on Wednesday. A breach of this level would erase much of the Dollar’s rebound from the April 21 year-to-date low.
Key Support Levels to Watch
If the DXY fails to defend the 100.00 threshold, technical traders would likely shift their focus toward deeper retracement targets. These include:
- 99.60–99.55 zone: A minor horizontal support area that has shown historical relevance, often attracting short-term buying interest during pullbacks.
- 99.20 area: A key technical level that has repeatedly acted as a pivot point in previous price cycles, marking shifts in momentum and trend direction.
- 99.00 round figure: A strong psychological support level and a critical threshold for market sentiment, where buyers have historically stepped in to defend the price.
Each of these zones could provide temporary relief for Dollar bulls, though the broader outlook would remain cautious unless the index can reclaim its short-term moving averages.
Fundamental Undercurrents and Market Sentiment
The fundamental backdrop remains somewhat mixed for the US Dollar, with investor sentiment shifting based on evolving expectations around Federal Reserve policy, macroeconomic data, and global risk appetite.
This week’s lack of significant follow-through selling, despite a clear risk-off tone, suggests that traders are hesitant to aggressively short the USD until clearer catalysts emerge, such as a decisive break below the 200-period SMA or renewed dovish rhetoric from Fed officials.
The recent rally, now stalling, had been supported by expectations of higher-for-longer interest rates in the US. However, incoming data on inflation and labor markets have begun to cool, reducing the appeal of the Dollar as a yield-driven asset. This macro softening further enhances the potential for technical breakdowns to evolve into sustained downtrends.
Upside Scenarios: Bulls Not Out Yet
Despite the emerging downside risks, USD bulls are not entirely out of the picture. Should the DXY manage to defend the 100.50–100.00 region and reclaim resistance at 101.00–101.10, a short-covering rally may materialize. This would open the door for a move toward:
- 101.70 level: A near-term horizontal resistance zone, reinforced by minor Fibonacci confluence, which may cap upside attempts in the short term.
- 102.00 psychological mark: A significant psychological barrier and technical resistance; a decisive break above this level could invalidate the current bearish bias and shift market sentiment toward a more bullish stance.
A sustained move beyond 102.00 would signal renewed bullish momentum, likely driven by either a shift in Fed rhetoric or a broad risk-off market sentiment that favors safe-haven flows into the Dollar.
Conclusion: Wait-and-Watch Mode Until 200-SMA Break
The US Dollar Index is clearly at a technical crossroads. Although it trades with a bearish undertone, the absence of decisive selling below the 200-period SMA (H4) keeps immediate downside prospects in check. A clear break and close below 100.50 would reinforce the case for an extended pullback and likely draw in trend-following sellers, targeting 100.00 and beyond.
Conversely, a bounce off current levels, followed by a close above 101.10, would ease the bearish pressure and reintroduce the possibility of further USD strength in the short term. For now, traders may remain cautiously bearish, with eyes firmly set on the 200-SMA for confirmation of the next directional move.
The coming sessions will likely prove pivotal in defining the near-term path of the Dollar. Until a decisive break emerges, volatility and range-bound action may persist, offering opportunities for short-term traders while longer-term participants await trend confirmation.
