Following yesterday’s FOMC interest rate decision and Jerome Powell’s press conference, the US Dollar Index (DXY) dropped sharply to point A.
On one hand, the 0.25% rate cut makes the dollar less attractive for capital preservation and yield. On the other, the prospect of a pause before further cuts provides some support.
Thus, the current level represents the market’s attempt to establish a fair valuation for the US currency.
Technical Analysis of the DXY Chart
Three days ago, we:
→ updated the system of two trend channels;
→ noted signs of seller dominance;
→ highlighted the formation of a consolidation zone.
Yesterday’s decline prompted an extension of the blue upward channel formed in October–November. Key insights from recent price action include:
→ the consolidation zone (marked by black lines) was broken after the median of the red channel acted as resistance (indicated by the arrow);
→ the price fell to the lower boundary of the red channel;
→ the former support around 98.78 acted as resistance this morning (marked by the second arrow);
→ the RSI indicator is near oversold levels, reflecting ongoing selling pressure.
Considering the above, a scenario of further downward movement along the lower boundary of the red channel seems plausible. If this develops, the price may fall to the lower boundary of the blue channel, which could serve as a key support level.
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