Dollar Index Analysis

• 19 January, 2024 Ruchit Thakur

Dollar Index Analysis

Evening Update: Will the Dollar Index (DXY) continue to strengthen or fall following jobless claims data ?

The Dollar Index (DXY) was trading around a significant support level between 100.50 and 100.80 last to last week, and it performed well to recover from that point. This area provided strong support for the Dollar Index, which the price diligently respected before exploding far beyond it. Earlier between February and May, the 100.50-100.80 zone provided reliable support. DXY recovered significantly after that, climbing into the 106.50-107.00 range.

• DXY has a strong support range of 100.50-100.80.
• Based on the trend, we could see DXY rally into the 105.50-107 range. 
• The chart predicts a likely triple bottom between 100.50 and 100.80, and the DXY has been trending upward since testing this important support. 

Please refer to the key support zone depicted in the chart above. The Dollar Index rose as bulls successfully guarded the 100.50-100.80 level. As we saw in 2023, the Dollar Index appears to be primarily moving sideways within a broad band of 100.50 to 105.50. If the Dollar Index can retake the 103.00-103.50 region, it may show signs of strength in the early months of 2024. DXY could soon be in the 105.50-107 range.

Earlier CPI data boosted dollar bulls, followed by jobless claims data, as the index rose from 102.20 to 103.50. Initial Jobless Claims counts the number of people who filed for unemployment insurance for the first time in the previous week. This is the most recent US economic data, however the market reaction varies from week to week.

A reading over forecast is generally negative (bearish) for the USD, whereas a reading below expectation is generally supportive (bullish).

Please study the support and resistance levels on the Dollar Index (DXY) weekly chart. Every level is represented by a spot chart.