The US Dollar Index (DXY) rose for a second day and traded near 98.40 in European hours on Wednesday. On the daily chart, it is testing the top of a descending channel near 98.50.
The index is above the nine-period Exponential Moving Average (EMA) but below the 50-period EMA. This setup points to a range-bound move within a wider consolidation.
Technical Momentum And Range
The 14-day Relative Strength Index is near 48.9, just under 50. This suggests weak momentum and limited direction while price trades between the two EMAs.
Resistance is seen near 98.50 at the channel top, then 98.60 at the 50-day EMA. A break above the channel could bring a move towards 100.64, a near 12-month high set on March 31.
Support is at 98.26 at the nine-day EMA, then 97.35, a 12-week low from February 23. Further downside levels include 96.49, a three-month low, then about 96.40 at the channel base.
If the index drops below the channel, the next level is 95.56. This was the lowest since February 2022, reached on January 27.
Looking Back From 2025
From the perspective of 2025, we saw the US Dollar Index in a tight spot, trading around 98.40 and pressing against key technical resistance. The market momentum was flat, with the RSI indicator sitting near 50, showing a real lack of conviction from traders at the time. This period of indecision meant traders were waiting for a clear signal before making any significant moves.
The index was effectively caught between its short-term and medium-term moving averages, suggesting a breakout was imminent. The critical test was whether it could break above the 98.50-98.60 resistance zone, a move that historically opened the door to much higher prices. That breakout eventually occurred as inflation data in the latter half of 2025 remained stubbornly high, forcing the Federal Reserve to maintain its hawkish stance longer than markets anticipated.
Fast forward to today, May 13, 2026, the situation is vastly different, with the DXY now trading firmly at 104.75. This strength is supported by recent economic data showing the US economy remains resilient. The latest jobs report for April showed a robust addition of 215,000 jobs, while core inflation is holding at 3.1%, proving stickier than the Fed’s target.
This persistent, albeit lower, inflation has kept the Federal Reserve from signaling any rate cuts, a sharp contrast to other central banks. Just last week, the European Central Bank hinted strongly at a rate cut in June, widening the policy divergence between the US and Europe. This divergence is the primary driver of the dollar’s current strength.
For derivative traders, this environment suggests that bullish dollar strategies remain favorable. Buying call options on the UUP (the Dollar Index ETF) with a strike price around $30, expiring in three months, offers a way to profit from continued dollar strength. This strategy limits downside risk while providing exposure to potential moves toward the 106.00 level last seen in late 2025.
Alternatively, selling out-of-the-money put spreads on the Dollar Index provides a high-probability way to generate income. A trader might sell a 103 put and buy a 102 put, collecting a premium with the expectation that the DXY will remain above 103 in the coming weeks. The primary risk to these trades would be an unexpected downturn in US economic data that forces the Fed to suddenly adopt a more dovish tone.
