The US dollar has just touched the key level of 97.23! Is this a genuine breakout or a bull trap?
2026-02-17 20:42:42
On Tuesday (February 17), the US dollar index showed signs of stabilization, currently fluctuating around 97.23, a slight rebound from the low of 95.56 at the end of January. Previously, the dollar had experienced four consecutive months of decline, with a cumulative drop of approximately 6.7%, once hitting a four-year low. Recently, the dollar has gradually shaken off downward pressure, and market attention is shifting back to changes in the US economic growth outlook and policy environment.
The dollar's recovery is closely related to robust domestic economic indicators in the United States. The relative resilience of the consumer sector continues to attract investment inflows, offsetting some of the previous headwinds. Analysts interpret this as the market's negative sentiment towards the dollar having been largely digested, and the dollar may gain a relative advantage over currencies such as the euro and pound sterling in the coming months. Despite foreign capital hedging pressures and policy uncertainties, their marginal impact is diminishing.
On the political front, with the midterm elections approaching, markets anticipate a potential shift in government stance towards a more growth-oriented approach, which could stimulate "animal spirits" and drive funds towards US assets. Furthermore, the nominee for the new Federal Reserve chairman, Kevin Warsh, is seen as a conservative who does not favor excessive easing, which has alleviated market concerns about inflation and a depreciating dollar.
The derivatives market also reflects this shift. In January, the market favored euro bulls, but after Warsh's nomination, risk reversal indicators for both the euro and the pound fell from their peaks. In the options market, interest in betting on a narrowing of exchange rate volatility in a "butterfly pattern" increased, indicating that investor concerns about a sharp depreciation of the dollar have eased.
However, some institutions remain cautious, believing that the US government's exchange rate preference may still lean towards a weaker dollar, and the dollar's trend may be a slow decline throughout the year. Overall, improved fundamentals have provided some breathing room for the dollar, but the sustainability of the rebound still needs to be verified by economic data.
Looking at the 240-minute chart, the US dollar index has formed a V-shaped reversal. After rebounding from the low of 95.56, it has recently closed with consecutive small positive lines, showing a steady pace and indicating active buying at low levels.
- Bollinger Bands indicator: The price is trading between the middle band (96.95) and the upper band (97.23). It is slightly suppressed when it touches the upper band, but it has stabilized above the middle band, indicating that it is in a short-term strong oscillation pattern.
- Moving average system: The price has stabilized above the 50-period moving average (97.12), and the short-term moving averages are trending upwards, indicating that the bullish momentum is dominant and avoiding the risk of a rapid pullback.
- MACD indicator: The two lines have crossed the zero axis, and the red bars continue to expand, indicating that bullish momentum is accumulating. However, the difference between the DIFF and DEA is small, suggesting that the rebound has not yet entered a strong range, implying that more catalysts are needed to drive the upward movement.
The first resistance level to watch is the upper Bollinger Band at 97.23. If it breaks through with significant volume, it could challenge the previous high of 98.03. The first support level to watch is the middle Bollinger Band at 96.95. If it breaks down, it may test the lower Bollinger Band at 96.67.
Some strategists believe the dollar's rebound stems from position adjustments. Institutions interpret this as the market being flooded with short dollar positions, but these positions are shifting, and the rebound is expected to continue at least into the third quarter. Meanwhile, strong consumer demand is attracting capital inflows, which is already reflected in the dollar's stabilization.
However, differing opinions exist among retail traders. Some argue that despite a cluster of short-term positive factors, the government's exchange rate stance remains a variable, and the full-year trend still needs data verification. The options market's shift to a "butterfly pattern" suggests that market expectations for volatility are stabilizing, which echoes the technical signal of expanding MACD histogram bars.
The US dollar index is currently in a short-term rebound window, with the resilience of fundamentals and the recovery of technical indicators working in tandem. If subsequent growth data continues to improve, the dollar is expected to test the 98 level; however, if uncertainty intensifies, it may return to the 96.5-97 range for consolidation. The key focus should be on the validity of the breakout above 97.23 and the corresponding trading volume.
Fundamentals: Economic resilience and policy expectations support a rebound
The dollar's recovery is closely related to robust domestic economic indicators in the United States. The relative resilience of the consumer sector continues to attract investment inflows, offsetting some of the previous headwinds. Analysts interpret this as the market's negative sentiment towards the dollar having been largely digested, and the dollar may gain a relative advantage over currencies such as the euro and pound sterling in the coming months. Despite foreign capital hedging pressures and policy uncertainties, their marginal impact is diminishing.
On the political front, with the midterm elections approaching, markets anticipate a potential shift in government stance towards a more growth-oriented approach, which could stimulate "animal spirits" and drive funds towards US assets. Furthermore, the nominee for the new Federal Reserve chairman, Kevin Warsh, is seen as a conservative who does not favor excessive easing, which has alleviated market concerns about inflation and a depreciating dollar.
The derivatives market also reflects this shift. In January, the market favored euro bulls, but after Warsh's nomination, risk reversal indicators for both the euro and the pound fell from their peaks. In the options market, interest in betting on a narrowing of exchange rate volatility in a "butterfly pattern" increased, indicating that investor concerns about a sharp depreciation of the dollar have eased.
However, some institutions remain cautious, believing that the US government's exchange rate preference may still lean towards a weaker dollar, and the dollar's trend may be a slow decline throughout the year. Overall, improved fundamentals have provided some breathing room for the dollar, but the sustainability of the rebound still needs to be verified by economic data.
Technical Analysis: Indicators are recovering, and bulls are building momentum for a breakout.
Looking at the 240-minute chart, the US dollar index has formed a V-shaped reversal. After rebounding from the low of 95.56, it has recently closed with consecutive small positive lines, showing a steady pace and indicating active buying at low levels.
- Bollinger Bands indicator: The price is trading between the middle band (96.95) and the upper band (97.23). It is slightly suppressed when it touches the upper band, but it has stabilized above the middle band, indicating that it is in a short-term strong oscillation pattern.
- Moving average system: The price has stabilized above the 50-period moving average (97.12), and the short-term moving averages are trending upwards, indicating that the bullish momentum is dominant and avoiding the risk of a rapid pullback.
- MACD indicator: The two lines have crossed the zero axis, and the red bars continue to expand, indicating that bullish momentum is accumulating. However, the difference between the DIFF and DEA is small, suggesting that the rebound has not yet entered a strong range, implying that more catalysts are needed to drive the upward movement.
The first resistance level to watch is the upper Bollinger Band at 97.23. If it breaks through with significant volume, it could challenge the previous high of 98.03. The first support level to watch is the middle Bollinger Band at 96.95. If it breaks down, it may test the lower Bollinger Band at 96.67.
Market View: Bulls and Bears Diverge, Focus on Data Validation
Some strategists believe the dollar's rebound stems from position adjustments. Institutions interpret this as the market being flooded with short dollar positions, but these positions are shifting, and the rebound is expected to continue at least into the third quarter. Meanwhile, strong consumer demand is attracting capital inflows, which is already reflected in the dollar's stabilization.
However, differing opinions exist among retail traders. Some argue that despite a cluster of short-term positive factors, the government's exchange rate stance remains a variable, and the full-year trend still needs data verification. The options market's shift to a "butterfly pattern" suggests that market expectations for volatility are stabilizing, which echoes the technical signal of expanding MACD histogram bars.
The US dollar index is currently in a short-term rebound window, with the resilience of fundamentals and the recovery of technical indicators working in tandem. If subsequent growth data continues to improve, the dollar is expected to test the 98 level; however, if uncertainty intensifies, it may return to the 96.5-97 range for consolidation. The key focus should be on the validity of the breakout above 97.23 and the corresponding trading volume.
- Risk Warning and Disclaimer
- The market involves risk, and trading may not be suitable for all investors. This article is for reference only and does not constitute personal investment advice, nor does it take into account certain users’ specific investment objectives, financial situation, or other needs. Any investment decisions made based on this information are at your own risk.
