Dollar Index (DXY) Analysis - A Deeper Correction Approaching?Dollar Index (DXY) Analysis - Is a Deeper Correction Approaching?
Since September 2024, the Dollar Index (DXY) has risen significantly, gaining 8.2%, marking its highest appreciation in months. This upward momentum has been fueled by positive economic indicators, increasing demand for dollars. Recently, the DXY reached the 107.00 mark, its highest resistance level since 2022. However, after hitting this point, the DXY exhibited a false breakout, suggesting potential buyer fatigue.
Currently, the price has dipped slightly to 105.93, with the possibility of further retracement towards the 38.2% Fibonacci level at 104.92 before continuing its upward trend.
Buying Potential
If the price returns to the range between 104.92 (38.2% Fibonacci) and 103.96 (50% Fibonacci) and shows a bullish reversal, it could indicate a continuation of the upward movement, presenting a buying opportunity. Key confluence points for the DXY include:
Horizontal support around 104.92, aligning with the Fibonacci retracement.
The overall upward trend since September.
The 50-period moving average on the daily chart, which may coincide with this support.
These factors suggest that if the price reaches the support zone, buyers could re-enter, pushing the price back towards recent highs around 106.97, potentially targeting 108.00.
Potential Targets
First Target: Retest the high at 107.00.
Secondary Target: Extend to 109.30, contingent on a confirmed breakout.
Alternative Bearish Scenario
If the price fails to hold at 104.92 and drops below the 50% retracement at 103.96, the index may decline further. In this scenario, the next significant support is at 102.99, aligning with the 61.8% Fibonacci retracement. This decline would indicate a deeper correction while still within a generally bullish framework.
However, breaching this level could negate the short-term bullish outlook and push the index down to 100.00, a key psychological support level.
Warning Signs for a Possible Sell Opportunity
A daily close below 103.96, suggesting weakening buyer support.
A sustained drop below 102.99, indicating a shift in the prevailing trend.
Summary
The DXY currently exhibits a predominantly bullish structure but is undergoing a natural correction after hitting a crucial resistance level. The area between 104.92 and 103.96 presents a potential buying opportunity, provided there are clear signs of a price reversal. Monitoring the specified support levels is crucial, as significant breaches could undermine the bullish scenario and lead to deeper declines.
Disclaimer
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