Technical Analysis

Is It Time For The Dollar To Cool Off?

  • The Dollar’s recent 6% rally is significant in the currency market, impacting various assets.
  • Technical analysis suggests a bullish trend for the Dollar, with potential resistance break outs.
  • A strong Dollar can lead to lower prices for gold and crude oil, impacting stock indices due to reduced export competitiveness.


The Dollar has rallied 6% since July. This might not sound like a significant amount, but it is a significant move for a currency paired against a basket of other currencies. The DXY index topped out at 114.7 in September last year, then started falling and dropping to a low of 99.5 in July. DXY is currently trading at 105.43, and even though DXY can’t be directly traded at this funded trading program, let’s take a look at some technicals for the Dollar and how it may affect other assets such as indices, Gold futures, and crude oil.

Technical Analysis

The monthly chart paints an interesting picture as DXY appears that it will close in the green this month, marking two straight monthly closes. It might also close above certain resistance levels above 106. Looking at the chart overall, it looks bullish to the eye.

Monthly chart DXY

The daily chart gives us a better picture of where the resistance zones are and currently, DXY is trading within one. The chart is still in a very strong uptrend so the resistance zone might just be a small hurdle as the Dollar drives toward 110.

Daily chart showing two resistance zones.

How This Affects Our Trading Decisions

A strong dollar typically leads to lower prices for gold and crude oil, as they are priced in dollars and become more expensive for international buyers. US stock indices may face pressure from a strong dollar as it can reduce the competitiveness of US exports, potentially impacting corporate earnings and stock prices. This means that the stronger the Dollar gets, the more ‘difficult’ it becomes for indexes and commodities to rally because they are all priced in Dollars. There are many other factors that affect the price of these assets, however, so there is no need to worry about that in this situation because most things are pointing toward overall strength in the US markets.