U.S. Dollar Index recovery stalls below 100 as traders brace for signals of Fed rate cut
Dollar Index snaps four-week losing streak, climbs to 99.60.
The U.S. Dollar Index (DXY) saw a bullish reversal last week, snapping a four-week losing streak.
After falling to 97.50, a level not visited since February 2022, the dollar found relief as easing trade tariff tensions under President Donald Trump lifted sentiment. The shift helped the DXY climb to a four-day high at 99.60, marking a short-term turnaround for the Greenback.
Technical factors confirmed the recovery. On the 4-hour chart, the DXY broke above the 20-period moving average and cleared the 98.70 resistance midweek. Since then, the 20-period moving average has flipped into support, while 98.70 now serves as a support floor. However, price action has stayed capped below the recent high at 99.60, leading to a three-day consolidation between the 98.70 and 99.60 range.
DXY price dynamics (April 2025). Source: TradingView
But today's price action is now reflecting some indecision. As of the European session on Monday, April 28, the dollar index is posting a modest 0.16% increase, trading sideways within the established range. Limited volatility suggests traders are reluctant to take decisive positions ahead of the Federal Reserve's upcoming FOMC meeting scheduled for May 7.
20-period moving average flips to support amid psychological 100 resistance
Momentum indicators point to early signs of exhaustion. On the 4-hour chart, the RSI is hovering just above the neutral zone, while the daily RSI sits near 40, a bearish territory, hinting that the short-term recovery may be losing steam.
Fundamentals also add pressure to the U.S. dollar outlook. Traders are raising bets that the Fed will resume rate cuts in June, pricing in a full percentage point reduction across 2025. Such expectations weigh heavily on the dollar’s prospects, especially as the Fed enters blackout mode ahead of its next policy decision.
Near-term, the psychological 100 resistance is likely to serve as a major cap unless stronger catalysts emerge. A break above 99.60 would open the path toward 100, but failure to hold 98.70 could trigger a renewed slide toward the 97.50 floor level. The dollar’s recovery remains fragile, between technical levels and growing fundamental headwinds.
The U.S. Dollar Index ended four weeks of losses, boosted by trade optimism. Key technical support from the 20 and 50-hour moving averages helped shift sentiment back to bullish.
