US Dollar Index (DXY) Closing In On Declining Trend Channel Support

The US dollar index declined for a second consecutive day, sparked by comments from ECB President Draghi on Tuesday that the threat of deflation in Europe is no longer present. The index is seen approaching a confluence of support that can trigger a reaction.

DXY was last seen trading near the lower bound of a declining trend channel that has contained price action since the start of the year. The lower line of the channel acted as support in early June to trigger a three-day recovery and held a sharp decline ahead of the Fed meeting earlier this month which led to a recovery to a one-month high prior to resuming lower once again.

Slightly below the trendline support, a horizontal level at 95.89 marks the spike low posted during the US election. This same spike has been breached in EUR/USD but USD/CHF has held above it as it has posted a low of 0.9579 in the week thus far versus the November spike low of 0.9549.

Near-term resistance falls at 96.32 which was the spike low posted ahead of the Fed meeting, followed by 96.51 which had triggered a recovery earlier this month.

US Dollar Index (DXY) Daily Chart

DXY Daily June 28

Jignesh is an analyst and trader, specializing in currencies and commodities. He utilizes a macro view as well as a proprietary method of pattern recognition that is based on the principles of Elliott wave. His focus is to assess strength in trends, and perceiving high potential turning points in the markets. He brings over 4 years of experience in his current role.