US Dollar Index Technical Analysis: Talk of the town

The US Dollar Index (DXY) is facing two main events this week which could see a surge in volatility for the Greenback, though with the risk of standing still at the end of the rollercoaster ride. Although the BoJ is set to deliver a game-changing rate decision and the Fed will need to be more clear to ease the nervousness in the market, it could actually not move the needle that much on the charts. 

The BoJ rate change has been overly communicated and commented on since December last year, while markets have grown accustomed to the constant repricing of when that initial rate cut from the Fed could take place.

On the upside, the 55-day Simple Moving Average (SMA) at 103.46 is facing some pressure again, likewise with Friday. Not far above, there is a double barrier with the 100-day Simple Moving Average (SMA) near 103.63 and the 200-day SMA near 103.70. Depending on the catalyst that pushes the DXY upwards, 104.96 remains the key level on the topside. 

Should both central bank meetings turn into a non-event, expect to see some easing in the US Dollar.  In this scenario, the downside looks inevitable once markets move forward again to price in a Fed rate cut for June, with 103.00 and 102.00 up next. Once through there, the road is open for another leg lower to 100.61, the low of 2023