Dollar Index – Monthly Analysis
The U.S. Dollar Index is approaching a technical signal not seen in 45 years.
If confirmed, it could mark one of the most important long-term turning points for the dollar in decades, with potential implications for rates, commodities, inflation, capital flows, and global risk assets.
In this monthly analysis, we apply our multi-frame methodology, combining candlestick structure, technical indicators, and Elliott Wave analysis, to assess the pressure building underneath the dollar and outline the scenarios that could define its next major move.
CANDLES
The U.S. Dollar Index (DXY) closed the week with bearish signals and will likely remain under short- and mid-term bearish pressure. However, Thursday’s monthly close was not strong enough to reverse the confirmed monthly candle bottom. So, while long-term bearish pressure remains present, the outcome is far from decided.
The most fascinating event, however, is developing on the 4M frame. It is highly likely that this frame will record a 50/100 bullish cross within the next 4–8 months. Extrapolation suggests that a similar event was likely recorded in the 1978–1980 timeframe, and that signal supported the powerful 1980–1985 rally, as circled on the 4-month chart. Let’s hope that this time, we see a different type of long-term move.
Overall, DXY is bearish in the short and mid term, while the long-term outlook continues to favor the upside.
ELLIOTT WAVES
At this stage, there is no substantial evidence to justify a change in the very long-term outlook. In March, the index possibly formed a long-term bottom.
Last Wave
At the micro level, DXY is possibly forming a zigzag for wave (ii), with a chance that wave c could morph into an Ending Diagonal. If this hypothesis plays out, the following DXY rally could be beyond impressive.
A new lower low below the January low would invalidate this scenario.
SUMMARY
DXY remains bearish in the short and mid term, but the monthly close did not reverse the confirmed monthly candle bottom, keeping the long-term outlook unresolved and still tilted to the upside. At the micro level, DXY may be forming a zigzag for wave (ii), with wave c potentially morphing into an Ending Diagonal. A new lower low below the January low would invalidate this setup.
The most important signal is developing on the 4M frame, where DXY is highly likely to record a 50/100 bullish cross within the next 4–8 months. Extrapolation suggests that a similar event likely occurred in the 1978–1980 period, preceding the major 1980–1985 dollar rally. This does not guarantee a repeat, but it places the current setup in a very important long-term category.
