DXY has been trading in a consolidative manner since the 22nd of February, staying near the downtrend line drawn from the peak of the 12th of December. As long as the index is trading below that line, we see a somewhat negative short-term outlook. However, given the latest sideways action near that line, and also bearing in mind that a lot of the forthcoming direction may depend on Jerome Powell’s testimony later in the day, we prefer to take the sidelines for now.
If Powell refrains from appearing too hawkish, which is our base case scenario, the index could come under some selling interest and perhaps challenge the 89.45 support level. That said, we prefer to wait for a decisive dip below 89.35 before we get confident on larger bearish extensions. Such a break may set the stage for our next support zone of 88.85. Another dip below that barrier could pave the way for the 88.35 zone.
DXY Chart analysis
Taking a look at our short-term oscillators, I see that both the RSI and the MACD lie near their equilibrium lines, confirming the recent flat price action and our choice to stand pat for now.
On the upside, a move above the aforementioned downtrend line could initially aim for the round number of 90.00, which currently coincides with the 200-EMA on the 4-hour chart. But in order to assume that the bulls have taken control, we need to see a move above 90.15. Something like that may initially aim for the 90.45 hurdle, defined by the peaks of the 8th and 9th of February.
Article written by Charalambos Pissouros, Senior Market Analyst at JFD Brokers