US Dollar Price Forecast: DXY Hovers Around 104.50, Poised for Possible BreakoutPublished by TotaFX Capital – November 8, 2024

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US Dollar Price Forecast: DXY Hovers Around 104.50, Poised for Possible BreakoutPublished
by TotaFX Capital – November 8, 2024

The US Dollar Index (DXY) maintains its bullish momentum on Friday, hovering near the 104.50 level during European trading hours. Investors are closely watching the DXY as it continues to gain traction within an ascending channel, indicating strong market sentiment favoring the US Dollar amid recent Federal Reserve actions and post-election stability.
DXY Testing Four-Month Highs
With the DXY holding steady around 104.50, market analysts are eyeing the possibility of it testing a four-month high of 105.45, a resistance level that was last reached on November 6. A decisive move above this level could further bolster bullish sentiment, potentially pushing the index toward the psychologically significant 106.00 mark, which represents the upper boundary of the current ascending channel.
The index has been moving upwards in a well-defined channel, highlighting a strong bullish trend backed by favorable technical indicators. This upward movement is being supported by the recent Federal Reserve rate cut and the prevailing optimism in the US economy post-election, creating a favorable environment for the US Dollar to strengthen further.
Technical Indicators Show Strong Bullish Bias

From a technical standpoint, the daily chart of the DXY underscores a bullish outlook. Notably, the nine-day Exponential Moving Average (EMA) stands at the 104.25 level, serving as immediate support. This is followed closely by the 14-day EMA at 104.09, providing an additional layer of support. As long as the DXY remains above these levels, the short-term outlook remains positive.
The Relative Strength Index (RSI), a popular momentum indicator, is also contributing to the bullish narrative, remaining above the 50 level. This reading reinforces the potential for further gains, as it suggests that the buying momentum remains intact. Furthermore, with the nine-day EMA positioned above the 14-day EMA, the short-term price movement signals an upward trend, suggesting that bulls have the upper hand.
Key Resistance Levels and Potential Upside Targets
For DXY traders, a breakthrough above the 105.45 level could open up new upside targets. The next psychological resistance lies at 106.00, marking the upper boundary of the ascending channel. Achieving this level would not only reinforce the bullish market sentiment but also indicate a continuation of the current uptrend. This channel-bound movement indicates that the index may continue to test higher boundaries unless a significant shift in economic fundamentals or central bank policy occurs.
Downside Risks and Support Levels
While the outlook remains positive, traders should also consider potential downside risks. The nine-day EMA at 104.25 serves as immediate support, with the 14-day EMA at 104.09 acting as an additional buffer. A breakdown below these levels could shift the momentum and pressure the DXY toward the lower boundary of the ascending channel, which currently sits around the 103.70 level. Such a move could signal a potential trend reversal or a period of consolidation, especially if accompanied by a weakening of macroeconomic indicators or dovish commentary from the Federal Reserve.
In summary, while the US Dollar Index remains in a strong position to test recent highs, traders should monitor the key support and resistance levels closely. A breakout above the 105.45 level could drive the index towards the upper boundary of the ascending channel, solidifying its bullish trajectory. Conversely, a break below the EMAs might trigger a re-evaluation of the bullish stance.

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Market Sentiment Post-Fed and Election Impact

The US financial markets have had a volatile week, largely influenced by the unexpected victory of former President Donald Trump in the recent election. Investors are assessing how his administration might impact economic policy, trade relations, and regulatory frameworks. Amid these uncertainties, the Federal Reserve recently announced a 25 basis-point rate cut, bringing the policy rate range to 4.5%-4.75%, as expected. Fed Chair Jerome Powell assured markets that the recent election results would not immediately impact monetary policy. This combination of political and economic shifts has sparked renewed interest in the US Dollar as a safe-haven currency, particularly given the uncertainty surrounding global markets.

The US Dollar’s resilience can also be attributed to the Federal Reserve’s cautious optimism on the economy. The central bank’s decision to balance inflation concerns with growth stability has given confidence to investors that further aggressive rate cuts may be off the table unless economic conditions shift dramatically. This positive stance supports a bullish outlook on the DXY, aligning well with technical indicators that suggest further upward movement.

Technical Indicators and Support Structures

Technically, the DXY’s daily chart paints a bullish picture, with the index moving within an established ascending channel. The nine-day Exponential Moving Average (EMA) at 104.25 serves as an immediate support level, closely followed by the 14-day EMA at 104.09. A break below these EMAs would be the first indication of a shift in the current momentum; however, as long as the DXY stays above these levels, it is likely to continue testing higher targets. This configuration also suggests a controlled upward trajectory, where each pullback is seen as an opportunity for bulls to re-enter the market.

The 14-day Relative Strength Index (RSI) also remains comfortably above the neutral 50 mark, reinforcing the ongoing bullish sentiment. As long as the RSI holds above 50, it signals that buying pressure outweighs selling, adding further confidence to those betting on a continued rally in the DXY. The alignment of the nine-day EMA above the 14-day EMA further strengthens this outlook, highlighting short-term upward price momentum that is well supported by longer-term trends.

Key Resistance and Upside Potential

The DXY faces critical resistance at 105.45, a four-month high that could act as a pivotal level in the short term. If the index manages to break through this resistance, it may see accelerated gains, potentially driving it toward the upper boundary of its ascending channel at the psychological 106.00 level. A move to this level would signal strong bullish conviction, as 106.00 has historically acted as a psychological and technical barrier.

Beyond the 106.00 level, the next significant resistance point lies at around 106.50, which could serve as a cap unless economic conditions or Federal Reserve policies shift decisively in favor of a stronger dollar. Traders should closely monitor these levels for potential profit-taking by bullish investors, which could trigger short-term retracements.

Downside Risks and Key Support Levels

On the downside, immediate support is provided by the nine-day EMA at 104.25, followed by the 14-day EMA at 104.09. Should the DXY drop below these levels, it may face increased selling pressure, with the next major support at the lower boundary of the ascending channel near 103.70. This level could serve as a line of defense for bulls, as a break below 103.70 might signal a reversal in the DXY’s upward trajectory, potentially leading to a consolidation phase or a downward trend.

Additionally, macroeconomic data releases could play a critical role in shaping the US Dollar’s movements. Upcoming indicators, such as the University of Michigan’s Consumer Sentiment Index, could provide further insight into consumer confidence in the US, which could impact the DXY. Similarly, next week’s inflation data will likely be closely watched, as it will inform expectations around the Fed’s future policy path. A higher-than-expected reading could reignite concerns over inflation, potentially supporting further dollar strength.

Global Implications and Market Sentiment

The US Dollar’s performance has broader implications for the global economy. As the dollar strengthens, it tends to put pressure on emerging market economies that rely on dollar-denominated debt. Additionally, commodity prices, which are typically priced in dollars, may face downward pressure as the greenback appreciates. For exporters in the Eurozone and Japan, a stronger dollar could also mean increased competitiveness, potentially benefiting these economies by making their exports relatively cheaper in global markets.

In the Eurozone, the EUR/USD pair remains under pressure, trading near 1.0770 after failing to stabilize above 1.0800. A strengthening DXY could further weigh on the Euro, particularly if economic conditions in Europe continue to lag behind those in the US. In the UK, the GBP/USD pair gathered momentum following a 25 basis-point rate cut by the Bank of England (BoE) but has since struggled to break the 1.3000 mark. A persistent rally in the DXY could hinder further gains for the GBP, especially as Brexit-related uncertainties and inflation forecasts cloud the UK’s economic outlook.

For USD/JPY, the pair has shown volatility, reaching a multi-month high above 154.50 before correcting on Thursday. With Japan maintaining an ultra-loose monetary policy, any upward movement in the DXY could exert additional upward pressure on the USD/JPY pair, testing the patience of the Bank of Japan, which has previously intervened to stabilize the yen.

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