Dollar’s Tiny Comeback—But Bears Aren’t Done Yet

The US Dollar Index (DXY) showed some life on Monday, up to 99.65 after 7 consecutive down days. This small bounce follows a big selloff that took the index to its lowest since April 2022. But the bigger picture is still bearish.

DXY is below the key descending trendline and the 50-day exponential moving average (EMA) at 104.18. While the RSI has bounced back from deeply oversold levels, it’s still at 24.86 – so a short term bounce is possible but the trend has not reversed yet.

The level to watch now is 99.00. A daily close below that could set up a move to 97.70 and potentially 96.20.

Dollar Index (DXY) Trade Setup: Cautious Bearish With Risk Controls

Primary Setup – Bearish Bias

• Entry: Below 99.00 after a strong daily close

• Target Range: 97.70 to 96.20

• Stop Loss: 100.25

Alternative Scenario – Temporary Rebound

• If 99.00 holds and RSI rises above 30, look for a short term bounce to 100.19 or 101.28

Don’t pre-empt the move. Confirmation is key. A daily close below 99.00 with volume support will be more reliable than early entries in a choppy market.

Macro Headwinds Are Bearish

The dollar is weak not just technically – it’s also being driven by macro forces.

Consumer sentiment is collapsing fast. The University of Michigan’s April sentiment index came in at 50.8, the lowest since mid-2022. Inflation expectations are rising too, with one year forecasts at 6.7% – making life harder for the Fed.

Geopolitics are also in play. China’s 125% retaliatory tariffs on US goods follow President Trump’s 145% tariff announcement – adding more uncertainty to global trade. Markets are now dealing with stagflation fears, slowing growth and mixed signals from the Fed.

Bottom Line: Trend Still Favors the Bears

Unless DXY gets back above 100.19 or 101.28, the trend is down. Oversold doesn’t mean undervalued – especially in a market with political risk and economic uncertainty.

Watch for economic data, central bank commentary and the US-China trade story to see if the bounce has life or if the bigger trend continues.