Dollar Index Analysis

Evening Update: Will the Dollar Index (DXY) continue to strengthen or weaken following the FOMC decision ?

 

Last week, much-anticipated CPI statistics arrived, and they were hotter than expected. Much to the dismay of Fed Chair Powell, the CPI is HIGH. US CPI inflation rose 0.3% in the month, beating expectations of a 0.2% increase. Headline CPI increased 3.1% year on year, down from 3.4% in December but far above the 2.9% expectation. The US core CPI increased by 0.4% month on month, beating predictions of 0.3%. Core CPI increased 3.9% year on year, mirroring the December increase but falling short of predictions of 3.7%.

US CPI inflation is much greater than what the Fed considers sustainable, with a 2% target range. Furthermore, core inflation appears to be more persistent than expected. Taking everything into account, the Federal Reserve's inflation campaign is far from over. Contrary to market expectations, I believe a rate cut will come in September, as inflation takes longer to return to the Fed's 2% target than many had anticipated. 

Last month, the Dollar Index (DXY) was trading on a firm support level of 100.50 to 100.80, but it rebounded well and touched 105.00. This zone provided solid support for the Dollar Index, which the price closely watched before soaring far beyond it. Previously, from February to May, the 100.50-100.80 zone offered steady support. The DXY recovered quickly after that, trading between 106.50 and 107.00.

The US Dollar Index (DXY) has experienced some selling pressure, sliding from weekly highs of 105.00. We'll go over all of this with a chart and several time frames. Please have a look.

 

• DXY has a solid support range of 100.50 to 100.80.
• Based on previous trends, the DXY might rise to 105.50-107. 
• The chart reveals a possible triple bottom between 100.50 and 100.80, and the DXY has steadily gained since testing this critical support level. 

 

 

Please refer to the essential support zone depicted in the above diagram. The Dollar Index climbed as bulls successfully maintained the 100.50-100.80 barrier. As we observed in 2023, the Dollar Index appears to trade largely horizontally in the range of 100.50 to 105.50. DXY may soon trade between 105.50-107.

The previous CPI data bolstered dollar bulls, followed by unemployment claims data, and the index rose from 102.20 to 105.00. Today's CPI statistics fuelled the Dollar Bulls.

 

Please review the graphic to understand its relevance. The Dollar Index (DXY) has broken out of a short-term supply zone near 104.50 and is moving higher. Any drop to the 102.50-103.00 level would be a good chance to go long in the Dollar Index.

Using charts and statistics, we can conclude that the DXY is bullish and heading for the 105.50-107.00 range. It may return to the 102.50-103.00 level in the short term, but each down move allows bulls to accelerate prices higher into the 105.50-107.00 zone.

 

Please refer to the Dollar Index's (DXY) weekly chart for support and resistance levels. Each level is represented by a spot chart.

 

Dollar Index	Support	Resistance
Level 1	100.50	105.50
Level 2	99.50	107.00