US Dollar Index Holds Steady Near 102.10 Amid Overbought Signals
The US Dollar Index (DXY) held steady around 102.10 on Tuesday, following modest gains from the previous day. The index retreated from an almost 18-month high during European trading hours but remains above key moving averages, including the nine-day and 50-day Exponential Moving Averages (EMAs). The 14-day Relative Strength Index (RSI) stands near 75.6, indicating overbought conditions despite the ongoing uptrend. The daily chart shows the index rising within an ascending wedge pattern, which suggests potential for further gains but also risks a reversal or correction if the structure fails.
Resistance levels are identified at the 18-month peak of 102.53, reached on 6 October, and the upper boundary of the wedge near 102.80. Support levels are clustered around the wedge floor at approximately 101.70 and the nine-day EMA at 101.60. A break below these levels could shift focus to the 50-day EMA at 100.37 and the four-month low of 98.56 recorded on 20 August.
Recent US services indicators showed the ISM services index easing to 54.9 from 55.4, slightly below the 55.0 consensus. Business activity and new orders softened, while employment, order backlogs, and prices paid strengthened. Derivative traders are advised to capitalize on short-term bullish momentum but remain cautious due to the overbought RSI. Downside protection, such as put options, is recommended just below the support level of 101.70.
Traders are encouraged to align their strategies with fundamental data, which shows the US services sector expanding solidly. Historically, such economic conditions have supported the greenback, allowing the Federal Reserve to maintain a cautious stance on rate cuts. In the coming weeks, traders should monitor key macroeconomic releases, particularly jobs data and inflation metrics, to time their entries effectively.