Dollar index – pullback encounters strong support at key technical level

The dollar extended losses for the third consecutive session, pressured by the escalating US-China trade conflict and dovish comments from Fed Chair Powell, which reinforced strong market expectations for two rate cuts before year-end.

The index pulled back from multi-week highs at 99.22/29, where the broader uptrend from the 2025 low at 95.82 stalled near the 76.4% Fibonacci retracement of the 100.04–95.82 decline. The decline, however, met solid support around 98.00 — a key zone marked by the top of the thickening daily Ichimoku cloud and the 38.2% retracement of the 95.82–99.29 advance.

The reaction around this area will likely determine near-term direction. A sustained break below 98.00 would neutralize the recent bullish structure and open the way for a deeper correction toward 97.56 (50% retracement / daily Kijun-sen) and 97.15 (61.8% Fibonacci) in extension.

Alternatively, a failure to break below 98.00 would signal that the pullback is losing momentum. A rebound and close above the daily Tenkan-sen (98.48) would be the first sign of recovery, suggesting a healthy correction phase before the broader uptrend resumes.

The overall technical backdrop remains constructive on the daily chart, though the dollar’s near-term direction will also hinge on the performance of its major components — the euro and the Japanese yen. The euro continues to hold firm despite France’s ongoing political turmoil, while USDJPY is showing early signs of stabilization following a two-day decline.

Res: 98.48; 98.82; 99.00; 99.29
Sup: 98.00; 97.79; 97.56; 97.15