US Dollar Index Technical Analysis: A buildup towards Thursday

The US Dollar Index (DXY) is facing some downside pressure on Monday. Expect a very nervous build-up to the main event on Thursday, the Personal Consumption Expenditures (PCE) Price Index release. The uptick in both the Consumer Price Index (CPI) and the Producer Price Index (PPI) numbers over the past two weeks is lifting market expectations for the PCE index, which means any number undershooting expectations might trigger a substantial leg lower in the DXY. 

To the upside, the 100-day Simple Moving Average (SMA) near 104.05 is the first level to watch as it is a support that has been turned into a resistance. Should the US Dollar be able to cross 104.60, 105.12 is the next key level to keep an eye on. One step beyond there comes 105.88, the high from November 2023. Ultimately, 107.20 – the high of 2023 – could even come back into scope, but that would be when markets reprice the timing of a Fed rate cut again, possibly delaying it to the last quarter of 2024. 

Looking down, the 200-day Simple Moving Average at 103.73 was broken on Thursday and should see more US Dollar bears flock in to trade the break. The 200-day SMA should not let go that easily, so a small retreat back to that level could be more than granted. Ultimately, it will lose its force with the ongoing selling pressure and could fall to 103.16, the55-day SMA.