DXY Holds Above Key Levels Amid Constructive Setup
The US Dollar Index (DXY) has been drifting lower during the early European session on Friday, eroding some of its strong gains from the previous day. The index is currently trading around the 101.30-101.25 region, down over 0.15% for the day.
The downtrend seems limited, however, as the DXY holds above the 200-period Simple Moving Average (SMA) on the 4-hour chart, indicating a constructive setup. The Relative Strength Index (RSI) hovers near 60 and the Moving Average Convergence Divergence (MACD) indicator stays marginally positive.
The technical analysis suggests that buyers remain in control, with any slide below the 23.6% Fibonacci retracement level at 101.09 likely to be bought into near the 38.2% level at 101.09. Deeper pullbacks would expose clustered support around the 61.8% and 78.6% retracements.
The recent FOMC policy meeting next week is expected to have a significant impact on the DXY, with elevated crude oil prices continuing to fuel inflationary concerns and expectations of at least one interest rate hike by the US Federal Reserve (Fed). Escalating US-Iran tensions and President Donald Trump's new sweeping tariffs also weigh on investors' sentiment.