Mapping the Market: Dollar faces critical test for more gains

• Bullish dollar trend intact since January's low of 95.566
• Monthly Ichimoku cloud base 102.00 has capped gains twice since May 2025
• Failure to surpass the cloud base, and ultimately the full cloud (102.00-105.57), would increase risk of a fall below the 100-month moving average at 99.29

To gauge the overall strength of the greenback, traders often look to the dollar index, which measures it against a basket of six major currencies.

Recent dollar price action has been choppy due to a technical hurdle standing in its way — the monthly Ichimoku cloud. Ichimoku analysis is a technical charting system that uses several lines similar to moving averages and a shaded area, known as the cloud, to show trend direction, momentum, and key support or resistance levels at once.

The base of the monthly cloud has capped dollar gains — first in May 2025 and again in June this year, when the index turned lower after nearing it.

This particular cloud is unusually thick, spanning from 102.00 to 105.57, according to data supplied by LSEG, making the base a formidable barrier to clear. The base of a cloud acts like a ceiling and the thicker the actual cloud is, the more buying pressure is typically needed to break through the base convincingly.

The dollar has rallied for most of this year, but recent price action has been choppy, and technical analysis indicates that the U.S. currency now faces a critical test if it is to launch a new phase of gains.

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