DXY: End of Trading Year Price Prediction

  • DXY printed a triangle reversal setup, and downtrends seem possible in the coming months.
  • Federal hint at slowed tightening.
  • A decline beneath 110 would affirm bearish reversals.

Indeed, we are approaching the trading year-end. The final months remain tricky to traders as most institutional and retail investors adjust their models while readying for the new year. Some scenarios witness profit booking. That reverses the initial position, and the market sees the opposite effects.

For instance, longing USD-JPY was the best trade in 2022. Anyone interested in booking profit may execute a short position to square the longs. Indeed, market players that longed for the United States dollar enjoyed earnings throughout the year.

The DXY (Dollar Index) reflects such cases. It highlights how currency baskets of the likes of CHF, GBP, and EUR performed against the United States dollar. TradingView’s chart confirms a visible bullish trend. Nevertheless, some reversal signals emerged from a fundamental and technical standpoint.

Triangle Reversal Setup Highlights More Weaknesses

A bullish bias incorporates multiple lower highs and higher highs. DXY has maintained higher highs since the year began, trading near 115 at some point. However, it met dynamic resistance at the bullish channel’s upper edge. Furthermore, it failed to record another higher high.

Instead, a triangle reversal pattern emerged, and the market retests the trend line at the moment. Indeed, bullish situations persist while within the climbing channel. However, a dip beneath 110 would translate to seller dominance, initiating reversals.

Federal Hinted at Slowed Tightening

The Fed has been among the initial central banks to execute quicker financial tightening. Thus, the United States dollar hiked across the FX board, with banks such as the ECB reacting slowly to the surged prices of services and goods.

However, Federal Reserve hinted at plans to slow the hiking pace last Friday. That had the market projecting smaller rate increases from the Fed. Meanwhile, the DXY seems to have topped at 114, and a dip beneath 110 would confirm an underway reversal.

Declined inflation in the US might welcome a swift turnaround in the United States dollar’s strength.