DXY Rally Hits Pivotal Resistance Amid Fed Expectations

The US Dollar Index (DXY) has surged over 4% from its August lows, but faces a critical test as buyers struggle to secure a weekly close above major resistance levels. The index has repeatedly failed to breach the key resistance zone at 101.92/98, which includes the May 2025 high and the September 2024 highs. Despite this stall, weekly momentum has strengthened to its highest level since early 2025, maintaining a constructive outlook for the broader recovery.

A sustained break above the current resistance would be necessary to confirm a resumption of the uptrend and expose the next major upside targets. Initial support has shifted higher, giving the bulls some room to consolidate without significantly damaging the near-term structure. The DXY remains pinned beneath this major technical ceiling, with Tuesday's trade keeping the focus on whether buyers can finally force a decisive break higher.

With a light U.S. data calendar, Fed expectations, Treasury yields, and tomorrow’s FOMC minutes could drive the next move into the weekly close. Key resistance levels are identified at 101.92/98, 103, and 103.82, while support levels are at 101.02, 100.16/42, and 99.36. The battle lines are drawn on the DXY weekly technical chart, with the focus on a weekly close above resistance to mark uptrend resumption.

The technical outlook noted that DXY had rebounded off confluent support with pivotal resistance now in view near the 2024 swing low. A weekly close above 100.42 was needed to mark uptrend resumption and fuel the next major leg of the advance. The index broke higher the following week with a three-week rally extending more than 4% off the August low. Subsequent resistance objectives are eyed at the 2016 high close and the 2020 swing high at 103, backed by the upper parallel of the yearly pitchfork and the 2017 swing high at 103.82.

Initial weekly support rests with the 38.2% retracement of the August rally at 101.02, with broader bullish invalidation now raised to the 2024 low / low week close (LWC) at 100.16/42. A break or weekly close below this threshold would suggest a more significant high is in place and a larger correction is underway. Subsequent support rests with the 52-week moving average, currently near 99.36.