After the latest market session and subsequent FOMC meeting, where a dovish tone was perceived due to the announcement of future rate cuts, the U.S. Dollar Index (DXY) is demonstrating an interesting technical picture. While the CPI remains high, signaling continued inflation concerns, the DXY's response has been somewhat paradoxical, showing strength instead of the anticipated weakness.
Technical analysis: Contrary to expectations, the DXY has rallied, testing a resistance zone near 104.60. This recent bullish behavior is challenging the previous downtrend narrative. Despite Powell’s dovish remarks indicating future rate cuts, the Index has managed to climb above the significant psychological level of 104.00. The ascending trendline, marked by the black line, supports the uptrend since the last significant low. The green shaded area represents a support zone that has propelled the recent upward movement. Should the Index sustain its rise and break through the current resistance, we might see it attempt to challenge the 105.00 level. Conversely, if the Index reverses and breaches the ascending trendline, it could signal a return to bearish sentiment, potentially revisiting the support around 103.00.
Our position: In light of the recent strength in the DXY, despite the dovish FOMC stance, we adopt a bearish approach. While our previous stance was also bearish, the current price action compels us to reassess. If bullish momentum persists, we may look for long opportunities on dips, in line with the Index's strength. However, we remain vigilant for any signs of reversal, which could validate our bearish outlook and offer sell opportunities.
Technical analysis: Contrary to expectations, the DXY has rallied, testing a resistance zone near 104.60. This recent bullish behavior is challenging the previous downtrend narrative. Despite Powell’s dovish remarks indicating future rate cuts, the Index has managed to climb above the significant psychological level of 104.00. The ascending trendline, marked by the black line, supports the uptrend since the last significant low. The green shaded area represents a support zone that has propelled the recent upward movement. Should the Index sustain its rise and break through the current resistance, we might see it attempt to challenge the 105.00 level. Conversely, if the Index reverses and breaches the ascending trendline, it could signal a return to bearish sentiment, potentially revisiting the support around 103.00.
Our position: In light of the recent strength in the DXY, despite the dovish FOMC stance, we adopt a bearish approach. While our previous stance was also bearish, the current price action compels us to reassess. If bullish momentum persists, we may look for long opportunities on dips, in line with the Index's strength. However, we remain vigilant for any signs of reversal, which could validate our bearish outlook and offer sell opportunities.