- The U.S. Dollar is exhibiting continued weakness, trading lower for the second consecutive session, although the downside momentum appears somewhat limited.
- Technical analysis suggests a bearish outlook, increasing the likelihood of further declines in the currency’s value.
- Confirmation of this negative forecast hinges on a decisive breach of the 200-period Simple Moving Average on the four-hour timeframe.
The US Dollar Index (DXY), a measure of the Dollar’s value relative to a basket of six major currencies, is trading with a downward bias for the second day in a row on Friday. However, the intraday decline lacks significant bearish momentum. The index is currently trading in the vicinity of 100.70, reflecting a decrease of slightly more than 0.10% for the day, and is managing to remain above the 200-period Simple Moving Average (SMA) as observed on the 4-hour chart. Market participants are closely watching upcoming economic data releases, including the latest inflation figures, which could significantly influence the Federal Reserve’s monetary policy decisions and, consequently, the Dollar’s trajectory.
Concurrently, bearish signals emanating from technical indicators on both hourly and daily charts are reinforcing the potential for a breakdown below the aforementioned support level, currently estimated to be around the 100.50 level. Should this support fail to hold, the DXY could become increasingly susceptible to extending its retracement from the recent peak, which marked its highest level since April 10. The next target would be a test of the weekly swing low, which was established near the psychological threshold of 100.00 on Wednesday. This level is considered a key area of interest for traders gauging the Dollar’s near-term direction.
Sustained selling pressure below the 100.00 mark would strongly suggest that the recent recovery from the year-to-date low, recorded on April 21, has exhausted its upward potential, thereby paving the way for more substantial losses. In such a scenario, the DXY could potentially decline towards the 99.60-99.55 range, representing an intermediate support zone, before ultimately targeting the 99.20 area and the psychologically significant 99.00 level. Investors are also monitoring global economic developments, including growth forecasts and geopolitical risks, which could further impact the Dollar’s performance as a safe-haven asset. The upcoming G7 meetings will also be closely watched for any coordinated policy responses that could affect currency valuations.
