U.S Dollar (DXY) Has Broken Down, Here Is The Next Target
The U.S. Dollar Index (DXY) has completed a critical breakdown from its long-term uptrend, signaling a potential significant shift in the currency market that could carry major implications for both forex traders and the broader financial landscape. The weekly chart clearly shows the dollar has decisively broken below the yellow uptrend line that had previously provided reliable support since early 2021, creating a technical setup that suggests further weakness ahead.
This breakdown is particularly noteworthy as it occurred after multiple tests of this support zone over the past three years, with each bounce becoming progressively weaker—a classic sign of deteriorating buying interest. While the dollar has recently found some short-term support around the $98.00 level, technical patterns suggest a retest of the broken yellow trendline at approximately $102.75 is highly probable before the next leg down. This classic "return to the scene of the crime" price action is a textbook technical pattern where previous support, once broken, becomes resistance on any subsequent rally.
Traders should anticipate this retest of the $102.75 level to serve as a high-probability shorting opportunity, as resistance that once acted as a floor for three years is likely to act as a formidable ceiling on any bounce. Following this retest, the technical pattern suggests the next major support target sits at the $97.40 level, where the dollar would intersect with a longer-term uptrend line (orange) that dates back to 2014 and has acted as a major floor for the dollar throughout multiple economic cycles.
From a macro perspective, this dollar breakdown aligns with the Federal Reserve's recent pivot toward rate cuts, as inflation continues to moderate and economic data points to a cooling labor market. While the Fed has signaled a measured approach to monetary easing, markets appear to be pricing in a more aggressive cutting cycle, pressuring the dollar despite still-elevated interest rates compared to other major economies. Additionally, growing concerns about the sustainability of U.S. fiscal deficits and recent signs of economic resilience in Europe and Asia are contributing to this bearish dollar sentiment. The anticipated bounce to resistance at $102.75 may coincide with periods of market uncertainty or economic data that temporarily pauses the Fed's easing trajectory, but the overall technical damage suggests this would be a counter-trend move within a larger bearish phase.
