U.S. Dollar Index forecast: Death cross forms amid weak retail sales and business data
U.S. Dollar Index hits five-month low amid extended losing streak.
The U.S. Dollar Index (DXY) has extended its losing streak to a third consecutive session, declining 0.38% during the European trading hours on Tuesday to reach a fresh five-month low near 102.83.
This drop follows a broader range-bound trading pattern between 103.70 and 102.80 over the past six trading days. However, with technical indicators flashing warning signs and key economic data painting a mixed picture, the dollar's next move remains uncertain.
From a technical standpoint, the recent decline has led to a bearish crossover between the 50 and 100-day Exponential Moving Averages (EMA), known as a "death cross." This development typically suggests a deepening downward trend, raising concerns over further weakness in the dollar. However, the daily Relative Strength Index (RSI) has entered oversold territory, indicating the potential for a short-term rebound toward 103.70 or an extended period of consolidation before further direction is established.
DXY price dynamics (Dec 2024 - March 2025). Source: TradingView.
Weak consumer spending and business conditions weigh on the dollar outlook
Fundamental data has also weighed on the dollar. The latest U.S. Retail Sales report showed a disappointing 0.2% monthly increase, well below the 0.6% forecast and sharply lower than the previous 1.2% reading. This signals weakening consumer spending, a key driver of the U.S. economy. Additionally, the Empire State Manufacturing Index plunged to -20.0, drastically missing expectations of -1.9 and marking a steep decline from the previous 5.7 figure. A reading below zero reflects worsening business conditions, further adding to the dollar’s bearish sentiment.
With economic indicators showing signs of slowing growth and technical patterns pointing to continued weakness, the dollar faces a critical challenge at the 102.80 support level. A break below this threshold could open the door for deeper losses, while any recovery above 103.70 may temporarily ease selling pressure. Traders will be closely watching upcoming economic releases and Federal Reserve commentary for further clues on the dollar's trajectory.
The dollar weakened as investors expected the Fed to keep rates at 4.25%-4.50%. DXY fell below 103, hitting a five-month low of 102.9 before briefly rebounding to 103.7.
