Dollar Index at a Crossroads: 109.877 and the Next Wave

By Grace Kim

A decisive break above 109.877 is Mehdi_Abbasi_EWP’s key bullish test for the US Dollar Index, with 97.349 and 95.175 anchoring a bearish setup.

TradingView author Mehdi_Abbasi_EWP set out those two paths in “DXY Daily | The Structural Puzzle,” a daily-chart analysis of CAPITALCOM:DXY that follows the author’s weekly work. Both readings may allow an initial rise, but their implications at higher wave degrees differ.

The analyst says visual price labels alone do not settle the case. He tests each structure against internal subdivisions, wave relationships and the rules of the Elliott Wave Principle.

What would confirm the bullish path?

Under the analyst’s previous higher-degree interpretation, DXY’s long-term structure is developing as a Double Zigzag, with the 2022 peak marking the start of Wave (A) in the second Zigzag. The three-wave decline after that peak is corrective against the advance.

The analyst had previously identified possible nested 1–2 structures across as many as three wave degrees. If that interpretation holds, price is preparing for a powerful third-wave advance: a strong impulse followed by Waves 4 and 5, completing the five-wave move at that degree.

He cautions that five waves would not complete the larger bullish move. DXY would still need a correction proportional to the preceding advance before analysts could assess another attempt at the prior peak.

The immediate trigger is 109.877. A decisive break, followed by a proportionate correction, would offer stronger evidence of continuation through at least the initial three-wave advance. The analyst says the quality of the post-breakout move matters as much as the breakout itself.

Could the rebound set up another decline?

The bearish count starts with the move from the 2022 peak to the recent low at 95.175, which the analyst reads as a three-wave structure. Waves A and C are unequal, and Wave C extends approximately 78.6% of the preceding wave, a formation consistent with a Classic Zigzag.

He says the recovery from 95.175 may remain corrective rather than begin a sustained bullish trend. It could develop as a Simple Zigzag or Double Zigzag, or become a Triple Zigzag if complexity increases.

Under that reading, price could form a correction within the 61.8%–78.6% retracement area of the preceding decline before reversing lower. If the subsequent decline develops with the required internal subdivisions and wave relationships, a bearish Leading Diagonal could become valid.

The analyst warns that resemblance alone cannot establish a diagonal. The marked levels 97.349 and 95.175 will test whether the bearish interpretation remains structurally sound.

What does the 2008–2022 advance imply?

In a separate review, the analyst evaluates DXY’s advance from the 2008 low to the 2022 peak as a five-wave Impulse. Waves II and IV both took the form of sideways corrections, leaving no clear alternation between them.

Alternation, he notes, is a guideline rather than an absolute rule. Its absence does not invalidate an otherwise compliant Impulse, but the detail becomes relevant if the dollar extends higher.

DXY could move toward the previous peak around 114, slightly above or below it, and then form a larger sideways correction. The analyst identifies three possible structures:

• a Regular Flat;
• an Expanded Flat; or
• another complex corrective combination.

He says it is too early to favor that path. Analysts must compare the new movement’s internal subdivisions with the preceding waves. A three-wave advance toward 114 differs from a complete motive structure that could carry DXY toward the 130 area at a higher degree.

How could dollar strength affect other markets?

The analyst says DXY’s correlation with gold, oil and cryptocurrencies is not permanently fixed. Those assets can move in the same direction as the dollar during early phases of a larger wave cycle, while a powerful third-wave dollar phase may coincide with deeper corrections elsewhere.

A pronounced DXY advance could also pressure exchange rates where the U.S. dollar is the quote currency. The analyst’s watch list covers EUR/USD, AUD/USD and NZD/USD, which could fall as the dollar strengthens against the euro, Australian dollar and New Zealand dollar.

He nevertheless says each currency pair requires separate analysis. Relative currency strength, individual wave structures and the timing of corrective or motive phases determine the local setup; correlation cannot replace that work.

Which path gains support next?

Both interpretations remain live, the analyst says, because direction alone will not settle them. The next price action must be judged on internal subdivisions, proportional relationships, wave degrees and links to the larger pattern.

“If a count violates an Elliott Wave rule, it must be reconsidered,” he says. If new price action changes the structural picture, he says, the interpretation must evolve with it.

The post closes with “We Follow Structure, Not Predictions,” followed by “Patterns whisper. I listen.” and the signature “— Mr. Nobody.” The next price action will decide which path gains support: a decisive break above 109.877 plus a proportionate correction would strengthen the bullish case, while the required rebound and decline would test the bearish path around 97.349 and 95.175.