US Dollar Index Holds Near 102.10 Amid Overbought Conditions

The US Dollar Index (DXY), which tracks the dollar against six major currencies, remains steady near 102.10 after a slight retreat from 18-month highs during Tuesday’s European trading session. The short-term outlook leans bullish, with the price holding above key moving averages, but the 14-day Relative Strength Index (RSI) at 75.6 signals overbought conditions, suggesting potential upside limitations.

Technical analysis indicates the DXY is rising within an ascending wedge pattern, a formation that typically suggests a temporary bullish continuation before a possible reversal or correction. Resistance levels are identified at 102.53, the recent 18-month high reached on October 6, and 102.80, the upper boundary of the wedge. Support is found at 101.70, followed by the nine-day EMA at 101.60. A break below this support could trigger a bearish reversal, targeting the 50-day EMA at 100.37 and potentially the four-month low of 98.56.

Analysts at ING note that the latest US services data, while slightly softer, still indicate economic expansion. The ISM services index dipped to 54.9 from 55.4 but remained in expansion territory. Despite a decline in business activity and new orders, stronger employment, order backlogs, and rising prices paid suggest resilient demand and inflation pressures, which continue to support the dollar.