DXY Breaks Trendline, Tests Last Support at 99.40 Ahead of NFP

The US Dollar Index (DXY) has hit a seven-week low of 99.65, sparking concerns about its future trajectory. A breakdown of the technical structure reveals that the rising trendline from March lows is broken, and the moving-average ribbon has rolled over.

Three macro forces are converging against the dollar: soft US labor momentum, with July's ADP payrolls coming in at 44,000, half of June's 95,000; the yen, which has official backing from a coordinated intervention between the US and Japan on August 1; and a potential deal to reopen the Strait of Hormuz.

The DXY is testing its last technical floor at 99.40, with key levels to watch including critical support at 99.40, next downside target at 98.66 (50% retracement), major reclaim zone at 100.45, and major swing high at 101.80.

While a bounce from 99.40 is possible ahead of the upcoming NFP print, unless DXY reclaims 100.45, any rebound is likely to be corrective rather than a trend reversal.