The US Dollar Index (DXY) traded near 98.30 during European hours on Friday, rising for a second day but staying below 98.50. On the daily chart it remains inside a descending channel, which points to a bearish bias.<\/p>\n
The index is below short-term averages, with the nine-period and 50-period Exponential Moving Averages now acting as resistance after being broken. The 14-day Relative Strength Index is around 40, showing weaker downside momentum that is still dominant.<\/p>\n
Support is near 97.50 at the lower edge of the channel. A break below the channel could push prices towards 95.56, the lowest level since February 2022, last reached on 27 January.<\/p>\n
Resistance levels include the nine-day EMA at 98.58 and the 50-day EMA at 98.87, followed by the channel top near 99.10. A move above this area could shift price action towards 100.64, a nearly 10-month high set on 31 March.<\/p>\n
We recall watching the dollar index struggle below 98.50 back in the spring of 2025, with a clear bearish bias dominating the charts. That descending channel held for a time, but the fundamental picture has since forced a major reversal. This presents a different set of opportunities for traders today.<\/p>\n
Today, with the index trading firmly around 104.15, the landscape is entirely different. Recent data, such as the March core CPI coming in at a sticky 3.7%, has forced the market to reconsider the Federal Reserve’s path. We have seen expectations for 2026 rate cuts dwindle from three to just one, providing strong underlying support for the dollar.<\/p>\n
For derivative traders, this sustained strength suggests buying call options on the dollar index for the coming weeks is a viable strategy. Look for expirations in May or June to capture continued momentum from this hawkish Fed repricing. Implied volatility has ticked up, so consider using bull call spreads to cheapen the entry and define risk.<\/p>\n
The dollar’s strength is also a story of relative economic performance, a trend we’ve seen solidifying since late 2025. With the latest Eurozone manufacturing PMI remaining in contraction territory at 45.8, the divergence between the US and European economies is widening. This makes buying put options on currencies like the Euro a compelling parallel trade to a long dollar position.<\/p>\n
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