UOB strategist Quek Ser Leang highlights a constructive technical backdrop for the US Dollar Index (DXY), noting similarities with the 2021 and 2025 basing phases. He stresses that a sustained break above the weekly Ichimoku cloud near 103.20 would complete the bullish setup, while a drop below 99.55/60 around the key EMAs would invalidate the positive structure.

Key levels define bullish setup

“The USD index fell to a low of 89.20 in January 2021, a move that unfolded alongside a positive divergence on the weekly MACD. This was followed by a period of accumulation/basing, as the index traded broadly sideways for several months.”

“Between August and October 2021, the index first broke above a declining trendline resistance, followed by a 21-week EMA crossover above the 55-week EMA. The index then broke decisively above the top of the weekly Ichimoku cloud. Taken together, these technical developments gave rise to a multi-month sharp rally.”

“In September 2025, the index fell to a low of 96.22, a decline that was also accompanied by a positive divergence on the weekly MACD.”

“Aside from a brief dip to 95.55 in January this year, the index has also largely traded sideways, resembling another period of accumulation and basing phase. Two weeks ago, the index broke the declining trendline resistance, and currently, the 21-week EMA is poised to cross above the 55-week EMA.”

“While the past technical setups resembling the current one have led to a sharp rally, there is no certainty they will result in a similar move again. That said, a clear break above the weekly cloud, now at 103.20, could open the way for further upside. “

“Note that the weekly cloud is set to move lower over the coming weeks, similar to the pattern in 2022. On the downside, a breach of 99.55/60, where the EMAs currently reside, would nullify the positive setup.”

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