DXY Bullish Reversal Ahead?!!!

Fundametnal Analysis:

DXY remains supported by a robust 5.25% Federal Funds Rate, attracting investment into USD-denominated assets. Inflation, reflected by a Core CPI of 0.3% and a CPI year-over-year of 2.5%, shows signs of moderation, reducing the urgency for further rate hikes, while stable PPI data indicates manageable inflationary pressures from the production side. Unemployment claims at 230K signal a slightly softening labor market, which could limit future rate hikes. However, the rise in consumer confidence to 103.3 points signals economic resilience, supporting near-term demand for the dollar. Overall, while moderating inflation and labor market cooling might temper DXY’s upside, the strong consumer sentiment and high interest rates keep the outlook neutral to slightly bullish....

Tip: If the Fed cuts interest rates due to moderating inflation and a softening labor market, DXY could weaken as USD-denominated assets become less attractive. However, if other countries also lower their rates, the impact on DXY may be less significant, as global monetary easing would offset much of the downward pressure on the dollar.



Technical Analysis:

DXY is showing signs of a potential bullish reversal after bouncing off key support at 100.691. The chart reveals a series of higher lows, indicating strengthening buying pressure. The RSI at 39.85 suggests the index is near oversold territory, further supporting the likelihood of a rebound. Immediate resistance is around 101.793, with the next target at 102.678, and a longer-term target near 104.100 if momentum continues. The Federal Funds Rate decision on September 18th will be crucial in determining whether this bullish breakout materializes. A break below 100.691, however, could invalidate this setup and push the index lower.

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