US Dollar Outlook: DXY Hints at a Swing High, but COT Signals Diverge

The US Dollar Index (DXY) is flashing early signs of a swing high after repeated rejection near 98 and a high-volume bearish outside day. Yet futures positioning tells a far less decisive story. With technicals and COT data pulling in opposite directions, traders may need to brace for choppy conditions before the next meaningful breakout unfolds.

View related analysis:

DXY Tests Key Resistance as Diverging COT Positioning Clouds the US Dollar Outlook

US Dollar Index (DXY) Technical Analysis

Upon initial inspection, one could build a near-term bearish case for the US Dollar Index on the daily chart. Bulls repeatedly failed to push USD above 98, and a high-volume bearish outside day marked a lower high on Wednesday.

If a significant swing high has formed around 98, it could mark the end of an ABC correction, with momentum eventually realigning with the broader sell-off from December’s high. This also aligns with my bearish view for the dollar this year, where I expect it to fall below 95 as part of a much larger, bearish trend.

However, I also suspect bears may be lulled into a false sense of security over the near term. The dollar index has found support around the 20-day EMA and weekly pivot point and bulls are trying to close today’s gap. Bears may want to wait for prices to retrace within Wednesday’s range to increase the potential reward to risk ratio to the downside. A break above 98 invalidates the short bias and risks a move up to 98.50 near the 200-day EMA.

Source: ICE, TradingView

US Dollar Index (DXY) Futures Positioning | COT Report

To add further confusion to the outlook, futures traders are divided on the US dollar.

Large speculators flipped to net-long USD Index exposure last week
Asset managers remained net-short
Aggregate net-short exposure to USD futures sits near a five-year extreme

When professional traders hold such divergent views, it often points to indecision rather than conviction. That suggests we may need to wait longer for a decisive breakout in the US Dollar Index. Until a clear catalyst emerges, expect choppy two-way trade, with DXY oscillating within established ranges rather than trending cleanly.

Chart analysis by Matt Simpson - Source: TradingView

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-- Written by Matt Simpson

Follow Matt on Twitter @cLeverEdge

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