The US Dollar Index (DXY) is poised for a potential upside, according to UOB strategist Quek Ser Leang, who draws parallels between the current technical backdrop and previous basing phases in 2021 and 2025. This analysis highlights the importance of key levels in defining the bullish setup, with a focus on the weekly Ichimoku cloud and EMAs. Leang's insights offer a comprehensive look at the DXY's technical landscape, providing a nuanced perspective on its potential trajectory.
A Technical Backdrop of Constructive Potential
Quek Ser Leang's analysis begins by emphasizing the constructive technical backdrop of the US Dollar Index (DXY). He notes that the current situation bears resemblance to the 2021 and 2025 basing phases, where the index exhibited a period of accumulation and sideways trading. This historical context adds a layer of depth to the current analysis, suggesting that the DXY's recent behavior may be indicative of a larger trend.
A key aspect of this constructive backdrop is the positive divergence on the weekly MACD, which occurred alongside the index's low in January 2021. This divergence, according to Leang, signifies a potential shift in momentum, further supporting the idea of a bullish setup. The subsequent break above the declining trendline resistance and the 21-week EMA crossover above the 55-week EMA in 2021 were pivotal moments that led to a multi-month sharp rally.
Key Levels and the Bullish Setup
The strategist's analysis delves into the significance of key levels in defining the bullish setup. He highlights the weekly Ichimoku cloud, a critical technical indicator, which currently sits at 103.20. A sustained break above this level would complete the bullish setup, potentially opening the door to further upside. Conversely, a drop below 99.55/60, where the EMAs reside, would invalidate the positive structure, indicating a shift in momentum.
Leang's perspective on the DXY's technical landscape is enriched by historical parallels. He draws attention to the index's low in September 2025, accompanied by a positive divergence on the weekly MACD, and the sideways trading pattern observed since January 2022. These historical similarities add a layer of confidence to the current analysis, suggesting that the DXY's recent behavior may be a repeat of past patterns.
Implications and Future Trajectories
The strategist's commentary extends beyond the immediate technical analysis, exploring the broader implications and future trajectories of the DXY. He acknowledges the uncertainty surrounding the past technical setups and their potential for a sharp rally. However, he emphasizes that a clear break above the weekly cloud could pave the way for further upside, while a breach of the EMAs' levels would nullify the positive setup.
In conclusion, UOB strategist Quek Ser Leang's analysis provides a comprehensive and insightful perspective on the US Dollar Index's technical backdrop. By drawing parallels to historical basing phases and emphasizing the significance of key levels, he offers a nuanced understanding of the DXY's potential trajectory. This analysis serves as a valuable resource for investors and traders seeking to navigate the complexities of the currency market.
