Dollar Index Awaits Breakout Ahead of Fed Decision

In today’s technical analysis, let’s take a closer look at the Dollar Index (DXY), which finds itself at a crucial crossroads just hours before one of the most important macro events of the month — the U.S. Federal Reserve’s interest rate decision. Markets are widely expecting a rate cut, but the size of the cut and, more importantly, the tone of the Fed’s statement will determine the future direction of the American dollar. Ahead of such a pivotal moment, it’s no surprise that the dollar index has entered a consolidation phase, with traders unwilling to commit strongly in either direction.

Currently, the Dollar Index is moving sideways, showing a clear lack of directional momentum. On the chart, this consolidation takes the shape of a symmetric triangle, marked with blue lines, reflecting shrinking volatility and growing tension between buyers and sellers. Price is coiling within this pattern, and this kind of technical setup often precedes a strong breakout. The triangle represents a balance between opposing forces — bullish traders defending higher levels and bearish traders capping any upward momentum. The closer we move toward the apex of the triangle, the more likely a decisive move becomes.

From a trading perspective, the approach here is straightforward. A breakout to the upside — confirmed by a daily close above the upper blue line — would signal that bulls are regaining control, opening the door for a stronger dollar recovery in the coming days. Conversely, a breakout below the lower boundary would mark a continuation of the broader weakening trend, providing a sell signal and possibly accelerating the decline. Given the proximity of the Fed’s decision, volatility will spike regardless of the outcome, and traders should be prepared for sharp, whipsaw-style movements.

Source: https://www.axiory.com/analytics/technical-analysis/dollar-index-awaits-breakout-ahead-of-fed-decision