RSI on the daily chart of DXY got down to extreme levels earlier in the week with a Tuesday close below the 25-level. This would be the lowest value for the indicator since 2020 when, at the time, the Fed was pushing loose monetary policy to stimulate growth despite much of the globe still being shut down. That instance soon led to a significant low and that was followed by a roaring rally in 2021 and 2022 as the Fed finally reacted to inflation.
RSI is not a great timing indicator - but it can be fantastic context and that's what I'm taking this as currently. It doesn't mean automatic reversal but it does mean caution if chasing the trend lower.
As for drivers, I think it's obvious what would need to push to allow the sell-off to continue and that's continued unwind of the USD/JPY carry trade, which for the past two days has been stalled. Going into Friday the big question is whether we see another push of weakness in USD/JPY which can have an outsized impact in DXY and, in-turn, USD-pairs, even something like EUR/USD despite the fact that the Euro is a much larger component of the DXY basket. - js
RSI is not a great timing indicator - but it can be fantastic context and that's what I'm taking this as currently. It doesn't mean automatic reversal but it does mean caution if chasing the trend lower.
As for drivers, I think it's obvious what would need to push to allow the sell-off to continue and that's continued unwind of the USD/JPY carry trade, which for the past two days has been stalled. Going into Friday the big question is whether we see another push of weakness in USD/JPY which can have an outsized impact in DXY and, in-turn, USD-pairs, even something like EUR/USD despite the fact that the Euro is a much larger component of the DXY basket. - js
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Disclaimer
The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.