A Stage-Based Rebound is Imminent

Summary:

The USDX is currently caught between "stagflation concerns" and "safe-haven demand," with a potential rebound likely at the key support-resistance level.

BUY USDX

Close Time

CLOSED

103.980

Entry Price

104.800

103.400

101.300 -0.170 -0.17%

58.0

Pips

Loss

103.400

103.320

Exit Price

103.980

Entry Price

104.800

Fundamentals

The US February CPI rose 2.8% year-on-year, with core CPI at 3.1%, both below expectations. Coupled with weak PPI data, markets are pricing in a 125-basis-point rate cut this year, leading to sustained dollar weakness. Additionally, US tariffs have sparked trade friction, potentially undermining the US dollar's credibility. CFTC data shows that long US dollar positions have halved since the start of the year to $16 billion, reflecting concerns about the backlash from trade wars.

However, US tariffs on steel, aluminum, and automobiles targeting Canada (steel and aluminum tariffs raised to 50%) and the EU (wine tariffs proposed at 200%) intensified global supply chain disruptions. The US core PCE price index rose to 3.1%, and imported inflation risks may limit the Fed's room for rate cuts.

Meanwhile, ECB President Christine Lagarde hinted that "achieving the 2% inflation target in the short term is challenging," boosting expectations for policy easing in the Eurozone. This indirectly supports the US dollar, which is expected to stabilize and rebound in the near term.

Technical Analysis

Based on the 4-hour chart, the USDX has stabilized in the short term, forming a "small rounding bottom" pattern. If it breaks and holds above the 104 level, a stage-based rebound may begin. However, the strength of the breakout should be monitored. If trading volume does not increase significantly, the momentum and sustainability of the rebound may be questionable. Key resistance is near 105, making short-term trading more suitable for buying low and selling high.

Try to buy with small positions when USDX hits 104.0. The target price should be put at 105.0 and the stop-loss stay below 103.5.

Trading Recommendations

Trading direction: Buy

Entry price: 104.0

Target price: 104.8

Stop loss: 103.4

Support: 103.5/103.0

Resistance: 104.5/105.0

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