In our earlier analysis of the US Dollar Index (DXY), we:
→ identified a descending channel (marked in red), shaped by a series of lower highs and lower lows;
→ projected that price could drift toward the channel’s median line.
As of 18 August, the DXY is trading near this median line and is currently forming a contracting triangle pattern (highlighted in blue). Meanwhile, the RSI remains anchored close to the neutral 50 level, suggesting an overall balance between buying and selling forces in the market.
This equilibrium, however, may soon be disrupted by key developments:
→ Later today, high-level discussions at the White House involving Donald Trump, Volodymyr Zelenskyy, and European leaders will center on the ongoing conflict in Ukraine. The talks are expected to shed light on geopolitical risks and may provide additional context following the Trump-Putin meeting held on 15 August.
→ On Wednesday at 21:00 GMT+3, the release of the FOMC minutes will be closely monitored by traders. Investors will seek insights regarding the probability of a rate cut in September, especially in light of last Thursday’s stronger-than-anticipated Producer Price Index (PPI) data, which some market participants view as a sign of potential inflationary pressures linked to new trade tariffs.
Given these developments, traders should brace for potential volatility, with price swings possible in either direction.
For this week, the primary scenario remains a test of one of the quarter lines (QL or QH) within the established channel. This would align with the broader US dollar weakening trend that has been unfolding since January 2025. However, a decisive breakout beyond either the QL or QH, combined with a sustained move away from the channel’s median line, would indicate a meaningful change in sentiment and open the door for a more directional move that breaks beyond the current consolidation structure.
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