Revisit: DXY long-term analysis (Weekly chart), maintain bullish

Revisit: DXY long-term analysis (Weekly chart), maintain bullish view on USD that DXY near or already end of the downtrend

Technical perspective

1. DXY continues to hold above its 14-year ascending trendline, despite a brief dip below it—underscoring the broader uptrend.
   
   
2. The index has yet to make a lower low following an RSI bullish divergence, signaling potential for a bullish reversal. The longer it consolidates above the trendline, the closer the index resumes its uptrend.
   
   
3. A rebound from current levels and a break above 100.00 would establish a higher low—an early reversal signal that could mark the end of the downtrend and potentially accelerate gains toward 105.00.
   
   
4. Overall, this area may mark the bottom of the current DXY bearish trend and could trigger a significant rebound.
   
   
5. However, a break below 95.00 would warrant a reassessment of this view.
   
   Fundamental Perspective:
   USD is poised to turn bullish due to the following factors:
   
6. The factors that had been weighing on the dollar are fading, paving the way for renewed USD strength. Those factors such as concerning over tariff policy, central-bank independence (as the Fed now began an easing phase), and the concern for large volumes of maturing US Treasuries have been rolled over and has proceeded smoothly.
   
   
7. Europe and the U.K.’s competitiveness has deteriorated due to war and conflict, forcing a shift to higher-cost energy sources that will weigh on the region’s industries over the long term. The region also lacks a powerful new S-curve industry like the US tech sector, including aging societies in many countries pose structural headwinds that erode long-run economic potential.
   
   
8. Early signs of improvement are also emerging in the US trade balance roughly six months after the Trump tariff regime took effect, with a progressively clearer recovery expected.
   
   
9. One counterargument is that a Fed rate-cutting cycle typically weakens the dollar. However, there are several reasons the USD may not depreciate due to Fed dovish cycle from now:
   1. Markets have largely priced in Fed cuts; the balance of risks now skews toward hawkish surprises.
   2. Trump’s tariff policy may weaken trading partners’ growth and currencies, which in turn supports the USD.
   3. Elevated geopolitical and trade uncertainty is boosting the dollar’s safe-haven appeal, drawing inflows even as rates fall—consistent with the dollar’s historical resilience during global stress.
   
   To conclude, USD appears to be in a gradual recovery phase, with a more obvious strengthen likely over the next year.
   

Analysis by: Krisada Yoonaisil, Financial Markets Strategist at Exness
P.S. Previous analysis: