U.S. Dollar Index braces for triangle pattern breakout amid tariff and recession risks
U.S. Dollar Index coils below 100 as breakout looms.
The U.S. Dollar Index (DXY) has entered a consolidation phase after last week’s sharp drop below the key 100 psychological level.
Since the plunge, price action has been compressed within a converging triangle pattern, trading in an increasingly narrow range. As of Tuesday, the DXY hovers near 99.4, as short-term volatility tightens significantly, reflecting a build-up of pressure that sets the stage for a decisive breakout.
A break above the triangle resistance could lead to a retest of the 100 level. This zone has acted as both a psychological and technical ceiling in days. A sustained move past this point would mark a recovery of lost ground. However, failure to break higher may open the path toward 98.5, a level not seen since March 2022.
DXY price dynamics (March 2025 - April 2025). Source: Tradingview
From a technical perspective, the RSI picture is mixed. The daily RSI sits deep in oversold territory, suggesting scope for a bullish correction. But on the 4-hour chart, the RSI is lodged in bearish territory and not oversold, suggesting that short-term downside risks still linger.
Fundamentals remain weak as safe-haven appeal of dollar fades
Fundamentals offer little support to the dollar as investors rotate out of the greenback, reducing its appeal as a safe-haven asset. Recent tariff policy shifts announced by President Trump have introduced headline risk that continues to weaken sentiment. Fed Governor Christopher Waller compounded concerns on Monday by calling the tariff moves one of the “biggest shocks” to the U.S. economy in decades. He added that the inflationary impact of these tariffs would likely be temporary, while recession risks are more pressing. Waller's comments shifted market focus toward potential monetary easing rather than inflation control.
Traders are now watching for a break from the converging triangle to determine the next direction. A move above 100.0 could ease bearish pressure. Conversely, a slide below 98.5 may confirm a larger downward leg, dragging the index toward multi-year lows.
The U.S. Dollar Index fell sharply after consumer sentiment missed expectations by 3.7 points. Weak economic confidence and policy concerns kept the dollar under pressure.
