U.S. Dollar Index path uncertain as bullish structure collides with weak macro sentiment
DXY bounce from 99.6 keeps bullish channel
The U.S. Dollar Index (DXY) is struggling to reclaim upside momentum after two consecutive days of declines triggered by weakening sentiment around U.S. economic stability. A lingering drag from Moody’s downgrade of U.S. debt, combined with geopolitical uncertainty after President Trump hinted at walking away from Russia-Ukraine peace talks, has rattled investor confidence.
• DXY bounce from 99.6 keeps bullish channel intact despite weak sentiment.
• Resistance at 50 and 100 EMAs caps short-term upside recovery attempts.
• Geopolitical tensions and debt credibility risks keep directional bias uncertain.
Technically, DXY is still holding above the base trendline of the bullish channel that has guided price recovery since the April lows. This support, currently near 99.6, cushioned today’s early downside during the Asian session after the index dipped below Monday’s low of 99.63. The bounce from this trendline support led to a modest recovery in the European session, taking the price back near the psychological 100 level by the start of North American session.
The U.S Dollar Index outlook fragile as price battles EMA barrier inside bullish channel
Despite the bounce, DXY is facing resistance from the 50 and 100 exponential moving averages on the 4-hour chart. Although price is testing these levels, the 50 EMA is positioned above the 100 EMA, suggesting there’s still a chance for buyers to regain short-term control if price reclaims territory above the EMAs. However, both the daily and 4-hour RSI are still in bearish zones. The 4-hour RSI is attempting to rise, which may support a near-term shift, but for now, momentum favours the downside.
DXY price dynamics (April - May 2025). Source: TradingView
This positions the DXY in a tight technical squeeze, trading between the supportive base of the bullish channel and EMA resistance. A break below the trendline would expose the next key support near 98.5, extending the retracement phase. On the flip side, reclaiming the EMAs could drive a renewed push toward the monthly resistance near 101.5.
Until price exits this compression zone, DXY’s direction will likely be influenced by further developments in both geopolitical headlines and investor response to the debt credibility issue.
Moody’s downgrade of the U.S. credit rating triggered further downside in the Dollar Index below 100. Price continued its bearish slide after opening the week under key resistance.
