Will the US Dollar Index Collapse Below 100? Or Back To 105?

18 ก.ย.

The big day has arrived: the first Fed rate cut. The burning question is, will it be 0.25% or 0.5%?


In recent days, the markets have been leaning toward a 0.50% cut. Could this be the catalyst for a breakdown below the critical 100 level in the USDX? Let’s break down the charts and find out.


Looking at the weekly charts, the 100 level has been a solid support zone for several years, briefly dipping below last year in what turned out to be a false breakout within the 100 - 107 range.


I’ve highlighted some key levels on the charts: last year’s low at 99.47, and just below that, the 0.99 mark, which is a key Monthly 0.618% fib level and a strong former resistance turned support (see image below).





Below this level is a significant BUY zone, where the massive 2022 rally began, breaking through 100 and eventually driving the price up to nearly 115.


Considering these key areas, I do suspect we may see a breakdown through the 100 level, but it will likely be met with strong buying pressure at the areas mentioned. This is why, for now, I’m leaning toward the upside for the US dollar.


Zooming into the daily charts, an M pattern is forming at this key support, suggesting that price is gearing up to break through the 100 level.





Additionally, there’s a divergence emerging on the MACD, indicating that although a break below 100 might occur, it could be short-lived. This is why we should be looking for buy setups as the price dips under this level.


Zooming in further to the 6-hour charts, we can see the divergence even more clearly, with the MACD on the verge of a crossover to the upside.





With all of this in mind, a whipsaw move could be on the cards today after the rate decision. I’ll be turning on my TRFX indicator and watching for buy setups on dips under 100 and toward 0.99.


Although the USDX may weaken in the longer term, I fully expect a strong reaction at the levels mentioned, with the price likely to run back up toward the 103-104 area before selling off again.


Let me know your thoughts in the comments below!