As expected this week, the US Dollar Index (DXY) continues to weaken as US Treasury bonds recover on growing expectations that the Federal Reserve will keep interest rates unchanged. At the same time, strong gains in global equities are reinforcing a risk-on environment, further reducing demand for the safe-haven US dollar.
From an Elliott Wave perspective, DXY appears to have completed a projected abc irregular flat, or alternatively a more complex wxy correction, in wave "iv". The latest downside move suggests that wave "v" is now underway, signaling the potential for another impulsive leg lower.
As long as the index remains below recent resistance, the bearish outlook remains intact. Wave "v" could continue to extend into next week, keeping pressure on the US dollar while supporting risk assets, precious metals, and commodity-linked currencies.
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