It has found a balance around key technical levels in what looks like a consolidation before the start of a new medium-term trend. The DXY has remained at its 200-day moving average for the past eight days, trading near the 103 level. A little over a month ago, it consolidated at this level and ended in an intensified sell-off with a drop of 2.9 %.
The fact that the dollar was able to rally and retest previous levels suggests that there was significant downside support keeping the DXY below 100. Approaching this level has attracted buying interest over the past year.
During the latest consolidation, the downward-sloping 50-day moving average changed its status from resistance to support.
Both factors are bullish for the dollar and point to further growth. Previous significant consolidations occurred at 113 and 106, which were pivotal levels in 2022 and 2023, respectively.
At the same time, two consecutive yearly highs lower point to long-term pressure. Typically, the dollar falls when the Federal Reserve is preparing to ease its monetary policy or is just beginning to do so in a growing economy. In this environment, domestic demand and imports are growing, and several smaller economies are of greater interest to investors.
The dollar’s movements over the past two years fit into a triangle, with the lower limit at 100 and the upper limit now at 104. Only when the dollar breaks out of this triangle will we see evidence that the market is leading the way. of the dollar. Until then, the market may change its mind more than once.
The outcome of this story may come next week, when the Federal Reserve meeting and monthly jobs report are scheduled. A decisive exit from the triangle could be the start of a multi-month move towards the breakout, with the potential to go as high as 115 in a bullish scenario (+11%) and as low as 90 in a bearish scenario (-13%). %).
The FxPro Analyst Team
