US Dollar Index Slips Toward 100.70; Eyes Breakdown Below Key 200-SMA Support

US Dollar Index Faces Bearish Pressure, May Break Below Key 200-SMA

The US Dollar Index (DXY) is currently trading around 100.70, marking its second consecutive daily decline. While the index is under pressure, there has yet to be strong follow-through selling. This suggests that the market may be in a period of consolidation before making a clear move.

Technically, the US Dollar Index shows a bearish setup. The index is holding just above the 200-period Simple Moving Average (SMA) on the 4-hour chart, a key technical support level. If the DXY breaks below this level and stays there, it could open the door to further losses. In this scenario, the next significant support is seen around the 100.50 level, followed by the 100.00 psychological mark, which could trigger a deeper retracement towards the 99.00 level.

Despite these bearish signals, the DXY has not yet seen strong selling momentum. A further decline could indicate the end of the recent rally from the year-to-date low reached on April 21, as the market potentially shifts to a more bearish trend. If the index continues its decline, the 99.60-99.55 region would likely become the next key support area.

On the other hand, if the DXY manages to hold above the 200-SMA and rises above the 101.00-101.10 region, a short-covering rally could be triggered, potentially driving the index back towards the 101.70 area. A breakout above this level would likely remove any short-term bearish bias and pave the way for further gains, possibly testing the 102.00 level.

Market participants will be closely monitoring these levels for further clues on the US Dollar's next move, as economic data and technical signals continue to influence the broader market outlook.