Dollar index technical signals point to deeper losses

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Dollar index technical signals losses

Highlights

Dollar index momentum indicators, including Relative Strength Index falling toward 50 and rising ATR, signal increasing seller control and further downside risk.
DXY broke below its 21-day moving average last week, shifting focus toward next support at 100.7 (55- and 100-day averages), then 99.7 and 98.56.
Technical analysts warn a drop below the lower trend channel at 99.36 would confirm a bearish outlook, unless DXY rebounds above the October high of 102.95.

Technical indicators signal a weaker dollar trend

As reported by Reuters, chart-based analysis suggests the dollar index, or DXY, is set for further losses after its recent rally begins to fade. The index, which measures the U.S. currency against six major peers, has been losing steam since mid-October.

Market technicians track momentum and volatility to judge whether a trend reversal or a temporary pullback is taking shape. One commonly used measure, the Relative Strength Index, has been falling from elevated levels since the start of October and appears to be moving toward a break below 50, a threshold that typically points to sellers gaining control.

A second gauge, Average True Range, is also reinforcing the weaker picture. Rising ATR alongside falling prices usually signals stronger conviction among sellers, and the dollar's ATR has been climbing in recent sessions as the index extends its decline.

Key support levels and downside risks

Traders are now focusing on support levels that could determine how far the dollar's retreat runs. The latest leg lower comes after the index falls below its 21-day moving average late last week, a break that often indicates fading strength.

The next downside targets are the 55-day and 100-day moving averages, both near 100.7. Below that, analysts are watching the 200-day moving average near 99.7, followed by the August 20 low at 98.56, based on data supplied by LSEG.

Technical analysts are also monitoring the dollar's upward trend channel for confirmation of a broader bearish turn. A drop below the lower boundary of that channel, at 99.36 for the dollar index, would add to the negative view, while a rebound above the October high of 102.95 would invalidate it.

Our earlier article on Micron Technology’s chart setup highlighted signs that the stock’s strong rally was losing steam after a break below a rising wedge pattern on the weekly chart. We noted that weakening momentum signals such as RSI and MACD were tilting the outlook bearish, with traders watching specific support zones unless Micron reclaimed key resistance levels.

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