TheMonero news Now greenback attempts a modest rebound toward 106.50 in Wednesday's European trading session.
Market participants remain cautious as the DXY continues to trade below critical moving averages.
Technical indicators suggest potential downside toward 106.20, while resistance looms at 106.85.
The US Dollar Index (DXY) demonstrates tentative strength during early European hours, recovering from recent losses to hover around 106.50. Market sentiment reflects growing concerns about inflationary pressures stemming from potential policy shifts in Washington, which could influence the Federal Reserve's monetary policy trajectory.
All eyes turn toward Friday's release of the Core PCE Price Index, the Fed's preferred inflation metric, which could provide crucial insights into future interest rate decisions. This high-impact economic indicator often creates significant volatility in currency markets.
From a technical perspective, the 4-hour chart reveals persistent bearish pressure as the index struggles below the psychologically important 100-period Exponential Moving Average. The Relative Strength Index (RSI) currently reads 46.40, remaining in bearish territory below the neutral 50 level, suggesting sellers maintain control in the near term.
The lower Bollinger Band at 106.20 emerges as immediate support, with a decisive break potentially opening the door to test December 2024 lows near 105.41. Further downside could see the index challenge November 2024 support around 104.19.
Conversely, bulls need to conquer resistance at the upper Bollinger Band (106.85) to regain momentum. A successful breakout above this level might target the 100-period EMA at 107.15, with additional resistance expected near the psychological 108.00 handle.
DXY Technical Snapshot: Key Levels to Monitor
Market participants should watch these critical technical levels as the dollar index navigates mixed fundamental signals. The convergence of technical indicators and upcoming economic data creates a potentially volatile trading environment for forex traders.