The US Dollar Index (DXY) is a fascinating and complex financial instrument, and UOB strategist Quek Ser Leang has provided an insightful analysis of its potential upside. While the index has been trading sideways for a while, with a brief dip in January 2021 and another in September 2025, there are some key technical indicators that suggest a bullish setup. Personally, I think that the similarities between the current situation and the 2021 and 2025 basing phases are particularly interesting, as they could indicate a potential sharp rally. What makes this particularly fascinating is the way that the index has been accumulating and basing, with a positive divergence on the weekly MACD in both cases. This suggests that there is underlying strength in the dollar, which could lead to a significant move higher. However, it's important to note that there is no certainty that the past technical setups will result in a similar move again. In my opinion, the key levels that define the bullish setup are the weekly Ichimoku cloud at 103.20 and the EMAs at 99.55/60. If the index can break above the weekly cloud, it could open the way for further upside. What many people don't realize is that the weekly cloud is set to move lower over the coming weeks, similar to the pattern in 2022. This could create a sense of urgency for traders who are looking to capitalize on the potential upside. On the downside, a breach of 99.55/60 would nullify the positive setup, which is a critical level to watch. If you take a step back and think about it, the fact that the index has been trading sideways for so long suggests that there is a lot of pent-up demand for the dollar. This could lead to a significant move higher when the right technical conditions are met. One thing that immediately stands out is the way that the index has been accumulating and basing, with a positive divergence on the weekly MACD in both cases. This suggests that there is underlying strength in the dollar, which could lead to a significant move higher. In conclusion, the US Dollar Index has the potential to move higher, but it's important to be cautious and watch for key levels. The similarities between the current situation and the 2021 and 2025 basing phases are particularly interesting, and the potential for a sharp rally is worth watching. However, traders should be aware of the risks and be prepared for a potential downside move if the EMAs are breached.
