US Dollar Price Forecast: DXY Tests $98.88 – Will Stalled Peace Talks Fuel a Breakout?

Market Overview

The US Dollar Index started to make some serious strides towards its first weekly gain in three weeks – all thanks to people flocking to it as a safe bet as US-Iran peace talks stalled and disruptions in the Strait of Hormuz continued to cause problems. And on top of that energy prices have been on the rise and inflation worries have been keeping Fed folk up at night, with a lot of them keeping a close eye on how conflicts might start affecting the economy.

The Euro on the other hand has been feeling a bit of the squeeze as the Eurozone’s composite PMI before slipped down to 48.6 in April which was a lot lower than the 50.1 they were forecasting for. And its not just the numbers that are bad – the services side of the economy has been hit particularly hard by energy costs going through the roof and weakening demand from the Middle East conflict. Also German IFO sentiment took a bit of a dip which adds to their growth worries.

The Pound is looking a bit more stable with the UK composite PMI rising up to 52.0 in April which is a big plus just so long as its a genuine expansion thats being driven by a rebound in the manufacturing sector ( and that went up to a pretty healthy 53.6). But what is being offset by record high costs due to supply chain issues and spiraling input prices have a bit of a dampening effect – all against a backdrop of geopolitical uncertainty that’s making people nervous.

DXY Tests the 98.88 Resistance: Trendline Rejection Keeps Pressure On

The US Dollar Index is knocking on the door of 98.78, right at a critical confluence zone where resistance from a horizontal line and a descending trendline intersect. Price is stuck below both the 50-day EMA and the 200-day EMA, keeping that overall negative bias in place despite a bounce from 97.60. The latest charts show some hesitation with tiny bodies right at the resistance line, implying buyers are starting to lose steam just as they hit the wall. The RSI is getting close to 60 but just flatlining, maybe we’ll see a rejection rather than continuation after all.

If DXY can’t break through to 98.90, it’s likely headed back down to 98.35 and 97.98. To change the game and get the index moving towards 99.50, we need to see a clean breakout above that trendline.

Trade idea: If we get a sell signal below 98.90, look to aim for 98.00, and put a stop above 99.20.

GBP/USD Dips Below the Trendline: Our Bullish Structure is Wobbling

GBP/USD is now trading near 1.3477, and it’s having trouble staying above its rising trendline support – a sign the bullish momentum is starting to wane. Price is stuck around the 50-day EMA, while the 200-day EMA is still lower down at 1.3435 as secondary support. Looking at the price action, it looks like we’re seeing lower highs form after a rejection at 1.3580 – a sign that sellers are slowly taking charge.

The RSI is heading down towards 40, a sign that we’re losing momentum overall. If we can get a sustained move below 1.3460, the losses could really accelerate to 1.3380. To stabilise, we’d need to see GBP/USD reclaim 1.3500–1.3520 and try to push on again.

Trade idea: If we get a sell signal below 1.3460, aim for 1.3380, and put a stop above 1.3520.

EUR/USD Hangs in the Channel: Rebound Potential Building

EUR/USD is floating around 1.1690, and lucky for it, it’s finding support right above the lower edge of that ascending channel and near the 200-day EMA at 1.1649. Yes, it’s had a bit of a rough patch lately, but the higher lows we’re seeing in the charts still keep the overall bullish trend alive. We’re seeing some stabilisation in the latest candles, with smaller bearish bodies and a wee bit of momentum around support.

The RSI is hovering around 40, and trying to head upwards – a sign that sellers are losing steam. If we get a bounce from these levels, we might see EUR/USD head back up to 1.1750 and 1.1800. However, a break below 1.1649 would be a real problem, and we’d need to worry about 1.1575.

Trade idea: If we get a buy signal near 1.1650, our target is 1.1750, and we’d stop below 1.1600.