DXY hit the 1W MA200 for the 1st time in 8 months! Will it hold?

20 Sep

The U.S. Dollar index (DXY) following the Fed's -0.50% Rate Cut, hit on Wednesday its 1W MA200 (orange trend-line) for the first time in 8 months (since the week of January 10 2024). This is obviously the strongest Support on a long-term basis and technically should attract the first wave of buying pressure.

However, the multi-year pattern, being a Channel Up, suggests that given some more weeks it should break and go for a Higher Low (blue Arc). As you can see on this pattern, every time the 1W MA200 was tested during a Bearish Leg, it broke.

The last two Bearish Legs initially made a dead-cat-bounce and then priced the Low just above the 1.236 Fibonacci extension. The 1W RSI in particular provides very useful insight on this, as on the first oversold (below 30.00) Low it makes the bounce and then on the second RSI low, which is a Higher Low i.e. a Bullish Divergence, the price bottoms and rebounds long-term.

As a result, with the 1W RSI bouncing on the 30.00 oversold barrier, we expect the price to rebound for a few weeks and then resume the downtrend towards the 1.236 and the bottom of the multi-year Channel Up. Our Target is 97.000.

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