The DXY (US Dollar Index) has been in focus recently, showing a significant breakout on the weekly time frame. As a technical analyst, I analyzed key indicators that confirm the strength of this breakout. Below, I share my observations under distinct headings to highlight the factors driving this move.
1. Price Trading Above the 40-Period SMA
The 40-period Simple Moving Average (SMA) serves as a critical benchmark for identifying trends.
• When the price remains above the 40 SMA, it signals bullish momentum.
• In the case of DXY, the price decisively broke above this average, indicating sustained buying interest and strength in the uptrend.
This alignment with the SMA adds reliability to the ongoing breakout.
2. Breakout of Resistance With Volume Confirmation
Breakouts are only meaningful when accompanied by strong confirmation, such as volume.
• On the weekly chart, DXY broke its resistance level at 106.
• Volume increased significantly during the breakout, validating its strength and reducing the likelihood of a false move.
This combination of price action and volume emphasizes the credibility of the breakout.
3. Measurement Target: Next Stop at 112
Using the breakout measurement method, the next target appears to be around 112.
• This method considers the height of the previous consolidation or resistance zone and projects it upwards.
• Given the bullish momentum and supporting indicators, this level seems achievable, barring unforeseen reversals.
Conclusion:
With price above the 40-period SMA, a breakout confirmed by strong volume, and a clear target, the DXY’s technical picture looks robust. However, as always, traders should remain cautious and monitor any changes in global macroeconomic conditions that could impact the index.
- What are your thoughts on DXY’s next move? Share your insights!