- The 5-day average is capping upside in the Dollar Index.
- A close above 97.37 is needed to confirm bull reversal.
- The bullish close looks unlikely amid dovish Fed expectations.
Dollar index (DXY), which tracks the value of the US Dollar against major currencies, is currently struggling to get past the descending (bearish) 5-day moving average (MA) of 97.31.
The bulls, however, need a close above 97.37. That would validate Wednesday’s big bullish engulfing candle – an early sign of potential bearish-to-bullish trend change – and open the doors to retest of recent highs above 98.20.
The bullish close, however, may remain elusive, courtesy of dovish Fed expectations. The markets are expecting the Fed to cut rates as early as September, according to the Fed funds futures.
DXY will likely fall back to 97.00 if the 5-day MA resistance remains intact through early European trading session.
That said, a big move above 97.37 could be seen later if the European Central Bank sends out a strong dovish signal, sending the EUR/USD pair sharply lower.
Daily chart
Trend: Neutral-to-bearish
Technical levels
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