tradingkey.logo

US Dollar Index Price Forecast: Finds floor at long-term historical support level

FXStreetAug 27, 2024 1:10 PM
  • The US Dollar Index has touched down on a key support level at the 100 mark.
  • This has historically provided a springboard for a recovery, however, it is too early to say whether history will repeat itself. 

The US Dollar Index (DXY) is in a medium and long-term sideways trend within a multi-year range. Since late July it has been steadily unfolding a down leg within that range from the ceiling at around 105, to the range floor at the 100 level. 

100 is important. Apart from being a key psychological level, 100 is also a major historical support level which has provided a safety net to falling prices on three prior occasions since 2023 (circled below). The question is, will 100 come to the rescue again on this occasion? 

US Dollar Index Daily Chart 

Price action is still bearish and there are no strong bullish reversal patterns forming – neither of the shape or the candlestick variety. This suggests a risk of more downside. A continuation south would probably see DXY reach the next support level at the 99.57, the July 2023 low. This is the lowest floor of the range – a decisive break below there would be a very bearish sign. 

The Relative Strength Index (RSI) momentum indicator is oversold on both the daily chart and weekly chart (not shown). This suggests prices are overextended to the downside and there is a greater risk of a pull back occurring. 

However, RSI has not yet exited the oversold zone, a necessary prerequisite for a buy signal. As things stand, the fact the RSI is oversold is merely a warning for bears not to add to their short positions, it would have to fully rise out of oversold to provide a reversal signal. 

The Moving Average Convergence Divergence (MACD) momentum oscillator has not crossed above its red signal line yet either. This too would be required to provide a buy signal. 

To conclude, there is a risk that although the US Dollar Index has reached a historic low it could simply continue falling unless price action forms a reversal pattern or momentum indicators provide firm buy signals. 

Disclaimer: For information purposes only. Past performance is not indicative of future results.

Related Articles

tradingkey.logo
tradingkey.logo
Intraday Data provided by Refinitiv and subject to terms of use. Historical and current end-of-day data provided by Refinitiv. All quotes are in local exchange time. Real-time last sale data for U.S. stock quotes reflect trades reported through Nasdaq only. Intraday data delayed at least 15 minutes or per exchange requirements.
* References, analysis, and trading strategies are provided by the third-party provider, Trading Central, and the point of view is based on the independent assessment and judgement of the analyst, without considering the investment objectives and financial situation of the investors.
Risk Warning: Our Website and Mobile App provides only general information on certain investment products. Finsights does not provide, and the provision of such information must not be construed as Finsights providing, financial advice or recommendation for any investment product.
Investment products are subject to significant investment risks, including the possible loss of the principal amount invested and may not be suitable for everyone. Past performance of investment products is not indicative of their future performance.
Finsights may allow third party advertisers or affiliates to place or deliver advertisements on our Website or Mobile App or any part thereof and may be compensated by them based on your interaction with the advertisements.
© Copyright: FINSIGHTS MEDIA PTE. LTD. All Rights Reserved.