US Dollar Basket Analysis: Is a Rebound on the Horizon?

The US Dollar Basket has faced significant selling pressure over the past week, currently trading around $1.0336. This sharp decline has pushed the price below the lower Bollinger Band for several consecutive days, a classic signal of oversold conditions.

Key Technical Indicators Suggest a Potential Reversal

1. Bollinger Band Analysis: Every time since May last year that the US Dollar entered the lower Bollinger Band on the daily chart, a bounce followed. This historical trend could indicate an upcoming reversal.

2. Candlestick Patterns: The price has attempted to move lower but has consistently closed higher, forming hammer dojis—a potential sign of selling exhaustion.

3. RSI Oversold Signal: The Relative Strength Index (RSI) has been in oversold territory for eight consecutive days. The last time this happened, the US Dollar rebounded by just over 1% in the following days. If history repeats, we could see a move toward $1.0440.

4. Critical Support and Resistance Levels: A break below $1.0287 would invalidate this bullish outlook, suggesting further downside risk.

Potential Market Impact and Considerations

While technical analysis indicates a possible short-term bounce, traders should remain cautious. The impact of geopolitical tensions, macroeconomic data, and Federal Reserve policy decisions could heavily influence price action beyond what the charts suggest.

Final Thoughts

If the historical RSI and Bollinger Band patterns hold true, the US Dollar may experience a relief rally in the coming days. However, market conditions remain uncertain, and traders should closely monitor key support and resistance levels for confirmation.