- The US Dollar recovered a good part of its losses in the early week, forming a key double-bottom – More upside to come?
- With Oil bouncing back above $105, its correlation with the FX Market picks up again
- US Dollar Index (DXY) in-depth Technical Analysis
The US Dollar regained much of its early-week losses and formed a double-bottom pattern on the charts, making traders question if more gains are ahead. As WTI Crude jumped back above $105, the link between energy prices and the wider FX market is growing stronger again.
After all, if the past session’s speech by Fed’s Williams (the most influential voter at the Federal Reserve) showed elevated concerns about energy prices, there are many reasons to put emphasis on their price rises as traders.
Still, the NY Fed’s president eased the influence of hiking dissents, so for now, this is won’t add to the nascent flame in the Dollar.
WTI Crude and Dollar Index (DXY) Correlation since Late February – Source: TradingView
Many in the market hoped to move past this long conflict.
But after yesterday’s serious geopolitical events, dollar bulls quickly returned to price in the risk of renewed war.
The semi-official Fars Agency reported that Iran launched missiles at US Navy ships in Iranian waters and carried out drone strikes on the UAE.
The US military and Israel are reportedly working together on possible limited responses. With the ceasefire just failing to lead to real diplomatic progress, hopes for peace could soon fall apart.
As a result, the wider FX markets are now at pivotal turning points, with the US Dollar leading the way, so we will look at the currency to spot how it could influence the action.
The Greenback is close to breaking its recent downtrend that followed the ceasefire.
If Crude oil rallies further, especially if it moves above $110, the petrodollar trade could quickly accelerate. Traders should keep a close eye on the war situation to see if any major breakouts are supported by real changes.
FX Performance (09:06 ET) – Source: TradingView. May 5, 2026
We’ll explore a few scenarios for upcoming action in an in-depth technical analysis of DXY.
Dollar Index (DXY) Multi-Timeframe Analysis
Daily Chart
Dollar Index (DXY) Daily Chart. May 5, 2026 – Source: TradingView
The US Dollar is stalling right at the middle of its 96.00 to 100.00 July 2025 range, forming a double bottom after repeatedly failed diplomatic attempts.
The Daily moving averages are now flattening, showing the general confusion across the FX and overall Markets – With the 200-Day MA getting tested in the morning, right at the 98.50 level, traders will want to see if it holds or breaks to power the next moves in currencies.
Let’s take a closer look.
4H Chart and Technical Levels
Dollar Index (DXY) 4H Chart. May 5, 2026 – Source: TradingView
The immediate action is tricky:
Sellers are attempting an entry at the downward channel top and 4H 50-period MA, but their momentum is shy.
Two scenarios should help to discern upcoming action.
- Above 98.60, the rally in the dollar confirms, with the next key level entering at 99.00 (and possibility for 99.50)
- Below 98.20, the bear channel holds and this could point to a test of 97.60 in coming days (this would require a lower WTI Crude).
Depending on the bull/bear scenarios, look for trades in FX pairs which provide interesting risk-reward scenarios, including EUR/USD, GBP/USD and GBP/USD – Don’t forget to do your own due diligence!
Levels to place on your DXY charts:
Resistance Levels
- 98.50 4H 50-period MA & 200-day MA
- 99.00 4H 200-period MA
- 99.30 to 99.50 Resistance
- 100.00 to 100.50 Main resistance and Range highs
- War Highs 100.544 (Double Top)
Support Levels
- 98.00 Major Support
- Support 97.40 to 97.70 (double bottom level)
- 2025 Lows Major support 96.50 to 97.00 (bear channel lows)
- Range lows at Early 2022 Consolidation just below 96.00
Safe Trades and keep track of the latest headlines!
Editorial note: This recovered market brief has been cleaned and reclassified by Next Move Markets for educational market intelligence. It is not investment advice.
This article is a market-intelligence brief, not a trade recommendation. Before acting on the theme, traders should define invalidation, position size and the time horizon of the setup. The same headline can support a short-term reaction and still fail as a multi-session trend if liquidity, policy expectations or broader sentiment move the other way.
Next Move Markets desk view
For active traders, this brief should be read through the lens of currency markets rather than as a standalone headline. The key question is whether the theme behind FX Confusion as the US Dollar Forms a Double Bottom – Can the Ceasefire Stand? DXY Outlook can influence positioning beyond the first reaction. That means watching central-bank expectations, yield differentials, dollar momentum and risk appetite together, not in isolation.
A richer trading read comes from separating the catalyst from confirmation. The catalyst explains why markets are paying attention; confirmation comes from price action, liquidity and cross-asset behavior after the headline is digested. If those signals do not align, traders should treat the move as fragile and keep risk tighter.
What traders should watch next
- Whether the move is confirmed by the U.S. dollar index and short-term rate expectations.
- How London and New York liquidity react once the initial headline risk is absorbed.
- Whether price action respects the latest support and resistance zones instead of fading immediately.
- Any follow-up comments from central-bank officials or data releases that change the rate path.
Risk context
This article is a market-intelligence brief, not a trade recommendation. Before acting on the theme, traders should define invalidation, position size and the time horizon of the setup. The same headline can support a short-term reaction and still fail as a multi-session trend if liquidity, policy expectations or broader sentiment move the other way.
Scenario map
The base case is that traders keep this theme on the radar while waiting for confirmation from central-bank expectations, yield differentials, dollar momentum and risk appetite. A stronger continuation scenario requires follow-through after the first reaction, preferably with related assets moving in the same direction. A failure scenario develops if the headline is quickly absorbed, volatility fades and price returns inside the previous range.
For currency markets, the most useful approach is to compare the article theme with live market behavior. If the market confirms the narrative, pullbacks can become more constructive. If the market rejects it, the headline becomes background noise rather than a trading driver.
Execution discipline
- Define the level first: traders should know where the idea is invalidated before thinking about upside or downside.
- Separate news from setup: FX Confusion as the US Dollar Forms a Double Bottom – Can the Ceasefire Stand? DXY Outlook may explain attention, but entry quality still depends on timing, liquidity and risk/reward.
- Watch confirmation: a clean move usually appears across related markets, not only in one isolated instrument.
- Control exposure: if volatility expands, smaller position sizing can be more professional than chasing the headline.
Next Move Markets treats this kind of brief as a starting point for preparation: identify the driver, map the scenarios, then wait for the market to prove which path is actually being priced.
