DXY TRYING TO FIGURE OUT A DIRECTION
Paul Robinson, Strategist
The US Dollar Index (DXY) has been chopping sideways with no real directional cues, but that could soon change with levels becoming increasingly clear. The grind leaves us with little to do in the very near-term unless opting to fade short-term price swings.
But with a little patience the choppy price action could bring conviction as levels get repeatedly tested and thus become more reliable as support and resistance. Thursday’s bounce helped cement a floor right around 91.75, with the level first having been resistance on March 2 and then validated as a level when it held as support on the 11th.
On continued weakness from here it will be important to see how price action plays out at support. A turn higher in momentum once support is touched will suggest that the range will to continue to develop at the least, with perhaps an upward bias later on if resistance can break.
On the other hand, a firm 4-hr/daily closing candle below support may kick off a leg lower towards the trend-line off the yearly low; currently just above 90.
On the top-side, resistance clocks in around 92.50. It’s big in both the short and long-term. There have been several turning points over the years from around this level, with the most recent occurring in August.
Shorter-term, the monthly high (92.50) also aligns with the declining 200-day moving average. A rise and break above will have the DXY in new recovery territory, but still running against the tide as the broader trend is still pointed lower.
All-in-all, conviction is lacking until we see further developments. Getting good price action around the floor near 91.75 may offer the best opportunity.