Synopsis:

Bank of America notes signs of exhaustion in the DXY rally near its two-year range highs. Technical indicators suggest a short-term correction to 104.80 is possible, though the broader uptrend could remain intact.

Key Points:

• Technical Signals:

  • The DXY reached the top end of its two-year range near 107.35, triggering a bearish exhaustion signal on November 13th.
  • A gravestone doji candle on Thursday's chart indicates potential trend exhaustion.
  • The 14-day RSI is overbought, further supporting the case for a near-term pullback.

• Correction Levels:

  • DXY may correct to 104.80, the neckline of a head-and-shoulders base pattern.
  • A deeper dip could reach 104.43, the first Fibonacci retracement level.

• Broader Uptrend Intact:

  • As long as the correction stays above the right shoulder low of 103.37, the broader uptrend remains intact.

Conclusion:

BofA suggests that the DXY rally is set to stall, with a likely dip to 104.80 in the coming weeks. However, staying above 103.37 would support the continuation of the broader bullish trend.