DXY may rebound significantly soonUS Dollar IndexCAPITALCOM:DXYKrisadaYoonaisilDXY Likely to Rebound Significantly Soon Technical Perspective: DXY recently broke below its previous low, forming a lower low, with both EMAs signaling a downtrend. However, the price has now reached a 14-year-old long-term ascending trendline support, which reflects the strength and effectiveness of this tool. So, we can expect a reaction at this line. Additionally, the RSI has entered the oversold zone (for the third time) and a Bullish Divergence has formed, supporting the possibility of a rebound in DXY in the near term. However, any rebound may only be short-lived due to the recent strong bearish momentum and the steepness of the downtrend. A pullback following the rebound may occur, possibly retesting the ascending trendline before a more sustained trend reversal can take place (unless the price breaks below the trendline, which would indicate a bearish continuation following the prevailing downtrend). The rebound, if it happens here, can target around the psychological level near 100 ±1 before pulling back again, which, if the pullback in the next shot does not result in a new low, it could signal the end of the downtrend, though this may take some time to materialize. (Please do not forget that we are looking at a weekly timeframe where each leg may take weeks or even months) Hence, this level may mark the bottom of the current DXY downcycle or, at the very least, trigger a significant rebound. Fundamental Perspective: The key factor behind recent US dollar weakness has been President Trump's tariff policies, which have raised concerns over US assets. However, negotiations with major trade partners have been progressing, and many are nearing resolution. This is helping reduce investor concerns over a potential disruption to the global economic system. The market appears to have passed its peak panic phase. Thus, further downside surprises are unlikely, as Treasury Secretary Scott Bessent recently remarked, the reciprocal tariffs announced are currently at the highest level. Over time, markets are expected to start pricing out the concerns, which could lead to a rebound in the US dollar. An overlooked risk is the sizable US government bond maturities from June to August 2025, which may strain rollover demand. A smooth passage of this period could restore dollar confidence and support DXY. Some may argue that potential Fed rate cuts may pressure the dollar, but with two cuts largely priced in, the impact could be limited. A rebound may follow as markets shift from "buy the rumor, sell the fact." Finally, please remember that President Trump’s tariff policies are aimed at reducing the US trade deficit—an objective that is likely to be met. As the effects of tariffs start to show in trade balance data by Q4 or beyond, confidence in the US dollar could return, accelerating DXY's recovery momentum. Call for Action: This zone presents potential for accumulating positions due to a potential reversal, for both short-term and long-term investors, with the added advantage of a high risk-reward ratio. Analysis by: Krisada Yoonaisil, Financial Markets Strategist at Exness