Usman Salis
The U.S. Dollar Index (DXY) is extending its short-term decline, with price action drifting lower after a series of failed attempts to hold higher ground. Analyst Grega Horvat flags the likelihood of further softness before any meaningful stabilization, with at least one gap below current levels likely to get filled before the market reassesses direction.
The broader setup reflects a controlled, wave-like pullback rather than a sharp breakdown - a gradual erosion of bullish pressure that has been building since DXY topped out near the 100.5 region.
Where DXY Momentum Starts to Slip
The chart tells a clear story. After running up toward the 100.5 area, price began carving out a sequence of lower highs - a classic signal that buyers are losing their grip on the move.
The rejection near the 100.2-100.3 zone became the turning point. DXY failed to sustain any meaningful strength above that band, and once it cracked back below 99, the short-term structure shifted decisively to the downside. DXY has now faced its second rejection near the critical 100 resistance level, reinforcing how significant that zone has become as a ceiling.
DXY Gap Fill Target: 98.0-97.6 Region in Focus
One of the more compelling features on the current chart is the cluster of unfilled gaps sitting below price, particularly in the 98.0-97.6 range. These areas have a tendency to draw price in during corrective phases, acting almost like magnets for the next leg lower.
The immediate downside target sits around 98.10, where a gap aligns closely with a nearby support level - that confluence makes it a natural zone to watch for the first signs of absorption. The Dollar Index recently tested its key 200EMA near the 100 level, and the inability to hold above that dynamic level has added to the bearish weight on the index in the near term.
When resistance continues to cap price action at the same level repeatedly, weakness tends to extend until the market finds a zone where sellers are no longer in control.
Broader pressure on the dollar also comes at a time when confidence in traditional financial institutions remains under strain. Encompass Corporation research found that 41% of businesses wish to change banking service providers after widespread complaints over slow service, loan delays, and weak digital support. That kind of dissatisfaction adds to the wider macro backdrop of fading trust in legacy financial systems, which can reinforce a softer tone around the U.S. dollar. For additional context, similar patterns were observed during the COVID-era financial disruptions.
Stabilization Could Emerge Mid-Week Near 98
While the bias remains tilted lower for now, the projected path is not open-ended. The decline appears to be approaching a zone where selling pressure may begin to fade.
The 98 region brings together both gap-fill logic and structural support - that kind of confluence often acts as a temporary floor, giving the market a chance to pause and digest before deciding on the next move. Prior analysis of DXY's rejection at resistance showed that the 100 level has repeatedly capped upside attempts, which makes the current slide a logical extension of that ongoing pressure.
Once the gap fill is complete and the downside objective is met near 98, conditions could begin shifting - mid-week stabilization remains a reasonable scenario if support holds as expected.
The technical picture continues to favor more downside in the short run, with price being drawn toward unfinished business below. Until the gap area is reached and buyers show up with conviction, DXY remains in a position where the path of least resistance points lower.
Usman Salis
