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US Dollar Index (DXY) Forecast: Bearish Outlook Persists Near 103.50 Despite Recovery

Key Highlights:

  • DXY rises to 103.60 in early European trading, up 0.14% for the day.
  • Bearish momentum remains strong, with RSI indicating further downside pressure.
  • Key support levels: 103.35 (March 17 low), followed by 102.20 and 100.53.
  • Immediate resistance: 104.10 (March 14 high), with further barriers at 106.15 and 107.38.

US Dollar Index Recovers Slightly, But Downtrend Holds

The US Dollar Index (DXY), which measures the USD’s value against a basket of six major currencies, is attempting to recover near 103.60 in the early European session on Tuesday. However, the broader trend remains bearish as investors brace for the Federal Reserve’s interest rate decision on Wednesday.

Despite the small uptick, concerns over US President Donald Trump’s tariff policies and their potential economic impact continue to weigh on the Greenback.

Market Focus: Fed Rate Decision & Tariff Impact

  • The Federal Reserve (Fed) is expected to hold interest rates steady in Wednesday’s policy announcement.
  • CME FedWatch tool shows a 60% probability of rate cuts later this year, with markets anticipating at least two reductions.
  • Tariff-related concerns are driving uncertainty, limiting USD’s potential upside.

Technical Outlook: Bears Still in Control

Bearish Signals:

  • DXY remains below its 100-day Exponential Moving Average (EMA), reinforcing a downtrend.
  • 14-day RSI sits at 31.50, well below the midline, indicating continued bearish momentum.

Key Support Levels to Watch:

  1. 103.35 – March 17 low
  2. 102.20 – Lower Bollinger Band
  3. 100.53 – August 28, 2024, low

Potential Upside Resistance:

  1. 104.10 – March 14 high (immediate resistance)
  2. 106.15 – 100-day EMA
  3. 107.38 – February 19 high

A break above 104.10 could trigger a short-term bullish retracement, while a decisive drop below 103.35 may expose the index to further downside risk.

Conclusion: Bearish Sentiment Dominates, Awaiting Fed Clarity

The US Dollar Index remains under selling pressure, with technical indicators signaling further weakness. The Fed’s rate decision and trade policies will be key drivers in the coming days. Traders should watch for a potential break below 103.35, which could accelerate losses toward 102.20 and beyond.

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Hamza Shah

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Published by
Hamza Shah
4 months ago

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