just now
Fed target interest rates haven’t moved, but DXY sure has. Market participants have been anticipating rate cuts to grow, especially when the Tariff Tantrum appeared in April.
Now, the street is still anticipating 50-75 basis points of cuts within the next 6 months. Typically, when a central bank lowers rates, capital leaves that currency to seek yield elsewhere.
However, the H1 2025 decline is one of the largest to start a year and this decline is mature and ready to bounce.
This is a weekly chart going back to 2008. There is a 5-wave rally and DXY is now going through a 3-wave decline. The 3-wave decline started in 2022 with waves A & B already complete. The decline from January 2025 is part of wave C.
Notice, the 38% Fibonacci retracement level from the 2008-2022 rally is near the current pricing of 98.
Additionally, take note of an upward sloping parallel price channel in place from the 2011 low. The support trend line passes through near 96.5 (ish).
There is an equal wave relationship where wave C would equal wave A near 96.32.
These 3 levels create a potential reversal zone between 96-98. That may sound like a large range to you, but this includes price levels going back to 2008!
Sometime in July, look for DXY to find a bottom and reverse higher. Upside targets for DXY include 102 and possibly 105. I am anticipating this rally in DXY to last the duration of Q3 and possibly bleed into Q4.
If DXY keeps slicing lower, the next major level of support is near 88.
DISCLAIMER: For educational purposes only. Trading comes with substantial risk, leading to possible loss of your capital. Traders are advised to do their own due diligence before investing.
