The U.S. Dollar Index is a measure of the value of the dollar relative to a basket of currencies that are the majority of the U.S.'s most significant trading partners.
The Dollar Index (DXY) has been weak since late March and could decline a lot further in the months ahead. In the short-term the dollar's decline is slowing and we could see a bounce before renewed declines.
Let's check out the charts of the DXY.
In the daily bar chart of DXY, below, we can see that prices have fallen significantly in a relatively short span of time. DXY is below the declining 50-day moving average line and the declining 200-day moving average line.
We have no information about volume of course but we can use a tool like price momentum. Here we can see that the 12-day price momentum has slowed from July into August. This is not a dramatic slowing of the pace of the decline but it can foreshadow a potential bounce.
In the weekly bar chart of DXY, below, we can see that prices could be headed back down to the lows of early 2018. Prices are below the declining 40-week moving average line.
The 12-week price momentum study is not yet showing us a bullish divergence so longer-term declines are possible.
In this daily Point and Figure chart of DXY, below, we see a potential downside price target in the 83 area.
In this second Point and Figure chart of DXY, below, we used weekly data and here the chart suggests a target in the 82-81 area.
Bottom-line strategy: The U.S. dollar is in a declining phase. This decline has lifted the price of gold and other commodities. We could see a sideways move in the index or even a bounce in the short-run but longer-term declines are in the cards, in my opinion.
