Dollar Index Holds Key Support After Liquidity Sweep

In today’s technical analysis, let’s take a closer look at the Dollar Index (DXY), which has recently been moving sideways but is shaping up a potentially decisive formation.

The current structure resembles a descending triangle, with a firm horizontal blue support acting as the base, and a dynamic downtrend line marked in black compressing the price action from above. This setup typically reflects a market under pressure, leaning toward bearish sentiment—yet not without bullish opportunities.

One particularly noteworthy development occurred in the previous week, when the Dollar Index briefly dipped below the horizontal support, triggering a liquidity sweep. This move, marked by a red highlight, ended with the formation of a hammer candle—a long lower wick and small real body sitting atop it. This type of candle often signals a rejection of lower prices and a potential shift in momentum.

Since that liquidity sweep, the index has rebounded modestly, hinting at a possible bullish reversal. However, for a clear trading signal, we must wait for a confirmed breakout:

• A break above the black downtrend line would indicate strength and serve as a buy signal.

• A break below the blue horizontal support would revive bearish sentiment and act as a signal to sell.

For now, it’s a waiting game, with the Dollar Index poised between pressure and potential. Traders should stay alert—this range won’t last forever.

Source: https://www.axiory.com/analytics/technical-analysis/dollar-index-holds-key-support-after-liquidity-swe