The US dollar has seen big declines in recent months. After peaking at $1.1325 in January 2025, the greenback has tumbled by 9.63%, with the DXY index testing critical support at $1.1200. Its path has been anything but smooth.

Analysts highlight that the $1.1200 level is not just psychologically significant. It aligns with a long-term trendline and the lowest closing level since 2023, making it a key technical benchmark for traders.

Technical indicators suggest the dollar’s decline may be overextended. The weekly Relative Strength Index (RSI) shows moderate positioning, while sentiment metrics reflect entrenched bearishness.

Bank of America’s mid-June 2025 survey reveals that asset managers hold record short positions in DXY futures relative to open interest. Meanwhile, most major currency pairs are testing key long-term support levels, including EUR/USD stuck in the $1.1500 range, USD/JPY hovering near 143/140, and AUD/USD trading in the 0.6630-0.6600 range.

Analysts believe that the current setup mirrors the dollar’s bear market seen eight years ago, when the DXY bottomed in September 2017 after an 11% plunge. While the Bloomberg Dollar Index now trades below its 200-week moving average, a level that typically prompts trend-following investors to sell rallies, the 2025 decline shows similar characteristics.