Mapping the market: Dollar could deepen its losses

The dollar has experienced a significant surge this year, climbing over 7.5% from its lows to highs due to factors such as the Iran war, inflation, and increasing bond yields. However, technical analysis suggests the greenback may face additional downward pressure. Analysts employ charts of past price patterns to forecast future movements, with the dollar index (DXY) being a common gauge for evaluating the US currency.

RSI, a momentum indicator, has been declining from high levels since October, indicating a potential shift below 50, signaling sellers gaining control. ATR, which measures daily price movements, has also been rising as the dollar's fall has continued, suggesting sellers are gaining conviction. Traders will now focus on identifying support levels, which could act as a floor for the dollar.

A further decline might target the 21-day, 55-day, 100-day, and 200-day moving averages, all around the 100.7 level, with a drop below 99.7 and the 200-day average near 99.7 being critical. Additionally, a fall below the 55- and 100-day moving averages, around 100.7, would be concerning. Analysts also use channels to identify support, with the dollar's trend channel currently rising.

A breach of the lower barrier within this channel, around 99.36, would be bearish. To contradict this bearish outlook, the dollar index would need to surpass the October high of 102.95. The dollar index appears to be eroding some of its gains this year, with a potential slide targeting 100.7, 99.7, and eventually 98.56. A resurgence above 102.95 could dispel the bearish sentiment.