Dollar Index Analysis

• 12 January, 2024 Ruchit Thakur

Dollar Index Analysis

Evening Update: Will the Dollar Index (DXY) continue to rise or reverse after the release of the CPI data?

The Dollar Index (DXY) was trading close to a critical support level between 100.50 and 100.80 last week, and it did well to rebound from that point. This area provided significant support for the Dollar Index, which the price dutifully appreciated before surging well above it. The 100.50–100.80 zone served as a solid support earlier in February and May. DXY performed well after that, rising into the 106.50-107.00 zone.

• For DXY, the 100.50–100.80 level is a solid support range.
• Based on the pattern, we could see a rally in DXY into the 103.50-104 area. 
• In the vicinity of 100.50-100.80, the chart suggests a possible triple bottom, and the DXY shows an upward trend following testing this critical support. 

Please refer to the above-described chart's critical support zone. The Dollar Index saw a price jump as bulls skillfully guarded the 100.50–100.80 region. As we have seen in 2023, the Dollar Index looks to be mostly drifting sideways within a wide range of 100.50 to 105.50. If the Dollar Index can reclaim the 103.00–103.50 range, it may indicate signals of strength in the early months of 2024. DXY could soon be heading toward the 105.50-106.00 region.

The CPI data supported dollar bulls, as the index moved up from the 102.15 to 102.75 zone. A basket of consumer goods and services is measured by the Consumer Price Index (CPI), which tracks changes in their respective costs. In order to ensure price stability, the central bank closely monitors this number.

A result that exceeds expectations is usually positive (bullish) for the USD, whilst a reading that falls short of expectations is typically negative (bearish).

Please review the Dollar Index (DXY) weekly chart's support and resistance levels. Every level is shown in a spot chart.