Immediate Resistance And Support Levels
The US Dollar Index (DXY) remains steady around 97.40, after three days of losses. A descending channel pattern on the daily chart suggests a persistent bearish trend, with the DXY below the nine-day EMA.
The DXY may find support at $96.38, a three-year low recorded on July 1. Should it drop further, the DXY could reach the channel’s lower boundary at 95.00.
Immediate resistance is at the nine-day EMA of 97.83, with a further barrier at the channel’s upper boundary of $98.30. A breakthrough could lead the DXY to the 50-day EMA at 98.63, advancing towards a two-month high of $99.42.
Percentage changes show the dollar as strongest against the Euro, while indicating minor shifts against other major currencies. The base currency is on the left of the table, with its corresponding quote currency along the top. For example, a move from the US Dollar to the Japanese Yen represents a change of -0.11%.
The information here should not be assumed as buying or selling advice. Risks are solely your responsibility, and thorough research is advised before making decisions. No guarantee of accuracy or timeliness is provided, and no specific investment advice is intended.
Strategic Positioning And Risk Management
Based on the persistent bearish trend shown in the descending channel, we are positioning for further dollar weakness in the near term. We believe buying put options on dollar futures or related currency ETFs is the most direct strategy. Our initial target for these positions is the support level at 96.38.
Recent data reinforces this view, as the University of Michigan’s Consumer Sentiment index fell to a six-month low of 69.1 in May 2024, suggesting growing economic pessimism. This weak sentiment makes a slide toward the channel’s lower boundary at 95.00 a credible scenario. We will be closely watching options volatility, which could signal an acceleration of this downward move.
However, we must remain vigilant for a reversal, especially since persistent inflation keeps the Federal Reserve in a “higher for longer” stance. A clean break above the immediate resistance at the nine-day EMA of 97.83 would be our trigger to close bearish positions. At that point, we would consider purchasing call options to play a recovery toward the 98.30 resistance level.
Historically, crowded trades in the dollar can unwind quickly, creating sharp reversals. The latest CFTC data from late May 2024 shows that speculative net-long positions on the dollar have decreased, suggesting conviction is fading but a short squeeze is still possible. We therefore prefer the defined risk of options over outright shorting futures contracts.
The dollar’s stated strength against the Euro informs our strategy on specific pairs. Should the index weaken as we expect, we anticipate the EUR/USD pair may lag behind other currencies in its rally. We will therefore focus our bearish dollar derivatives on pairs like USD/JPY, which recently showed a change of -0.11%, to capture a potentially larger move.
