- DXY bounces off trend support
- Bullish reversal hints at near-term upside
- EUR/USD charts skewed lower
- Nvidia and payrolls to drive broader dollar tone
Summary
The narrow U.S. dollar index (DXY) has bounced off trend support and printed a bullish reversal, hinting at a possible push toward the November highs. EUR/USD is showing the opposite pattern, with price action and momentum tilting lower. With Nvidia’s results and the delayed payrolls report on deck, the broader dollar tone over the next 48 hours will likely be shaped by how risk appetite responds to these events.
DXY Delivers Multiple Bullish Signals
The DXY daily chart below makes for pleasant reading for dollar bulls, with Monday’s rally helping deliver a three-candle morning star—a textbook bullish reversal pattern following a downtrend. Strengthening conviction that we may have seen a near-term low, the price kissed uptrend support dating back to late September on Friday before bouncing, eventually delivering a doji on the day. Adding to the bullish signal, the downtrend in RSI (14) was broken late last week, reaccelerating higher above 50, indicating building topside strength. MACD has yet to confirm but remains firmly in positive territory beneath the signal line, providing a more neutral read than anything. Net-net, the oscillators are tilting bullish, favouring long setups over short.
Source: TradingView
With the price now trading above 99.39—a former resistance level—it has provided something of a base to build bullish setups around. Longs could be established above the level with a stop below for protection. While 100 is one potential target given its psychological significance, the 200-day moving average located just above screens as a far tougher test. If it were to be broken, keep an eye on the price action around 100.25, should DXY trade there. It has acted as both support and resistance for more than a year, so how it interacts with that level may provide a strong signal on medium-term directional risks.
EUR/USD Downside Risks Grow
As the largest weight in the DXY, it comes as little surprise that the price and momentum signals mirror what’s been seen in EUR/USD recently. It has delivered a textbook evening star on the daily chart below after being rejected twice at 1.1650 resistance, providing a strong bearish signal that downside risks are building.
Source: TradingView
EUR/USD now trades beneath 1.1607, a minor level but one that has acted as resistance and support over the past week. As such, it could be used to build setups around, allowing for shorts to be established beneath it with a stop above for protection. 1.1578 is another minor level found just below, making it screen as an early hurdle rather than an end target unless you’re a short-term scalper. Instead, 1.1550 is a more significant level to keep in mind as a target, with the November swing low of 1.1470 and support at 1.1450 other options after that.
The message from RSI (14) and MACD remains neutral more than outright bearish, although recent signs point to directional strength starting to tilt lower again. RSI (14) has broken its uptrend and moved back beneath the neutral 50 level, while MACD remains entrenched in negative territory above the signal line but looks like it may soon start rolling over.
From a non-technical perspective, everyone knows the two main scheduled risk events this week: Nvidia’s earnings report out after U.S. market close on Wednesday and the delayed September payrolls release a day later. There’s no edge in how markets will react to either report, but in a general sense, unless any risk-off episode is sparked by political factors in the United States (think tariff-tension escalation or renewed fiscal/Fed-independence concerns), it would generally support dollar strength. If risk-off is driven by those circumstances—or we have a risk-on environment—it would generally promote modest euro upside.
