UOB strategist Quek Ser Leang has highlighted a constructive technical backdrop for the US Dollar Index (DXY), drawing parallels to previous basing phases in 2021 and 2025. According to Quek, the index's recent sideways trading and technical developments, such as breaking a declining trendline resistance and the imminent crossover of the 21-week EMA above the 55-week EMA, mirror patterns that previously led to sharp rallies in the DXY [1].
Quek notes that a sustained break above the weekly Ichimoku cloud, currently near 103.20, would complete the bullish setup and potentially open the way for further upside in the index. Conversely, a drop below the 99.55/60 level, where key EMAs reside, would invalidate the positive structure and nullify the bullish outlook [1].
Historical context is provided, with the index falling to a low of 89.20 in January 2021 and 96.22 in September 2025, both accompanied by positive divergences on the weekly MACD and subsequent periods of accumulation. While past technical setups have resulted in multi-month rallies, Quek cautions that there is no certainty the current setup will yield similar results [1].
Additionally, the weekly Ichimoku cloud is expected to move lower in the coming weeks, echoing patterns observed in 2022. This technical evolution is seen as a key factor in determining the next directional move for the DXY [1].
CONCLUSION
UOB's technical analysis suggests the US Dollar Index is positioned for potential upside if it breaks above the 103.20 level, though a drop below 99.55/60 would negate this outlook. While historical patterns point to possible rallies, there is no guarantee of repetition, and traders should monitor these key levels closely. The market sentiment is cautiously optimistic, with medium impact expected as technical signals unfold.