Dollar Index – Weekly Analysis
In this U.S. Dollar Index weekly report, we revisit historical technical patterns that the Dollar may be attempting to replicate and evaluate the forward outlook. By comparing current price structure, momentum signals, and key levels with past setups, we assess the probabilities for the next directional phase.
CANDLES
The Dollar failed to lift off the bottom and is now signaling potential weakness on the weekly and smaller time frames. Momentum remains soft, suggesting the risk of further downside in the near term.
The monthly frame, however, still has a fair chance to close as an Inside candle. For a decisive bearish outcome, DXY would need to finish February below the January low.
MACD – Weekly
I continue to view the weekly MACD as a meaningful leading indicator for the U.S. Dollar. Looking back at the 2020–2021 period, the Dollar experienced a substantial decline that ultimately concluded with a pronounced bullish divergence on the MACD histogram. The initial recovery attempt during that cycle was rejected at the 50-week moving average (WMA), while the second attempt — highlighted by the blue arrow — successfully reclaimed that level and marked a structural shift.
Based on current dynamics, any further marginal decline is highly likely to produce a comparable divergence on the weekly histogram. Notably, the first recent attempt to regain the 50 WMA was rejected four weeks ago. This suggests that the Dollar may now be entering a bottoming phase on the weekly timeframe, potentially developing over the next three to five weeks. The 50 WMA remains a critical technical level, and a decisive breakout above it would likely carry significant implications for the broader trend.
ELLIOTT WAVES
At this stage, there is no substantial evidence to justify a change in the very long-term outlook. January’s move respected the flag boundary precisely, potentially completing the classical pattern and reinforcing the existing long-term framework rather than altering it.
Road Map
The mid-term roadmap remains unchanged. On the micro level, however, the structure is still inconclusive and lacks sufficient clarity.
We will need to wait for a more mature wave development before drawing higher-confidence conclusions.
SUMMARY
The Dollar remains technically fragile in the short term after failing to sustain a lift from recent lows. Weekly and smaller time frames lean soft, while the monthly still has room to close as an Inside candle. A decisive February close below the January low would strengthen the bearish case.
At the same time, the weekly MACD is approaching conditions that historically preceded meaningful bottoms. Any marginal new low is likely to produce bullish divergence on the histogram, similar to the 2020–2021 setup. The 50-week moving average remains the key level to watch – a confirmed breakout above it would materially improve the mid-term outlook.
