DXY – Is the US Dollar’s Trend Still Intact? What Elliott Wave is Telling Us
- John Nwatu MSTA CFTe
- Aug 5
- 2 min read
🟦 Quick Overview
📈 Bias: Short-term Bearish → Medium-term Bullish
🎯 Signal: Watch for Reversal Zone Around $94
🧭 Why: Structure suggests one final push down before a larger upside move resumes
⏳ Timing Zone: Reversal expected from ~$94. Invalidation below $89.50
Macro View: The Dollar’s 17-Year Uptrend
The US Dollar Index (DXY) has remained in a structural uptrend since 2008, navigating global crises and rate policy shifts while retaining its role as the world’s reserve currency. From the 2008 financial crisis and ultra-low yields in Europe and Japan to the Fed’s tightening cycle and the US stock market boom, the dollar has consistently attracted global capital.
Recent headlines noted that the dollar logged its first monthly gain in 2025, sparking renewed interest in its directional outlook. But is this the beginning of a sustained rally, or just a pause in the ongoing correction?
Elliott Wave Breakdown
From a wave perspective, it’s tempting to assume that a 17-year uptrend reflects a clear impulsive structure. However, the chart suggests otherwise.
Weekly Chart View:
The price action is choppy with overlapping waves, lacking the distinct Wave 3 usually found in strong impulses.
The best fit is a long-term complex corrective pattern:
W = Zigzag
X = Flat
Y = Still unfolding — likely a Zigzag
This implies the correction is not yet complete, with one final wave down expected to finish the larger structure.
Daily Chart Insight:
At first glance, the most recent low looks like it could be a completed fifth wave. However, the supposed Wave 3 in that structure is actually shorter than Wave 1 and 5, violating impulse rules.
The more probable count is:
A Zigzag structure
With a Running Flat in Wave B
Current action = Wave 4, possibly forming a Triangle
Why this matters:
Wave 2 was short and simple
According to the Law of Alternation, Wave 4 should be longer and more complex — which aligns with the triangle view.
Action Plan
Near-Term Expectation:
Price to decline toward the $94 zone
Reversal Watch:
$94 = Potential turning point
If reversal occurs, likely target is $120, aligning with:
The 1.0 Fibonacci extension of Wave A
Major resistance in 2001
Invalidation Level:
A weekly close below $89.50 would invalidate the bullish thesis
That would suggest a break of trend and require a full reassessment
Final Word
Despite short-term downside risks, the bigger picture suggests the dollar still has more to offer. This structure is a great example of how markets move in complexity, not simplicity and patience here could offer a high-reward setup.
Until next time…
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