DXY soars amid expected rate increases
The US Dollar Index’s five consecutive daily gains have taken it to levels last seen in May 2020 on the back of hawkish comments made by the Fed’s Vice Chair-elect, Lael Brainard, and March FOMC minutes.
Yesterday the US Dollar Index (DXY) briefly traded at near two-year highs as bonds dropped aggressively and equites sold off in the wake of comments by the US Federal Reserve’s (Fed) Vice Chair-elect, Lael Brainard, which put the reduction in Fed’s balance sheet back at the centre of the monetary policy discussion.
The market’s rationale seems to be that if Brainard, a notorious dove, is on board with rapid tightening, then her Federal Open Market Committee (FOMC) colleagues must be thinking along the same lines.
Market participants are thus not just factoring in successive 50 basis point hikes in the US this year, but also an oversupply of treasuries that were bought up during the emergency policy era of the pandemic.
All of the above has benefitted the greenback, which often acts as a safe haven, with the US Dollar Basket rising by around 1.75% to 99.67 - levels last seen in May 2020 - in the past five consecutive up days alone.
The index has risen by over 3.5% year-to-date and has advanced by over 7.5% in the past year.
The psychological 100.00 mark is within reach now that a brief break out of its one-month consolidation phase has occurred.
For the past month or so the index has been capped by the 99.29 to 99.45 resistance area but repeatedly bounced off the 97.78 to 97.69 support zone.
The medium-term the trend will remain bullish while the index - which has a 57.6% euro, 13.6% Japanese yen, 11.9% pound sterling, 9.1% Canadian dollar and to a lesser degree Swedish krona and Swiss franc weighting - remains above the late March low at 97.69 on a daily chart closing basis.
Technical upside targets are the 100.60 May 2020 high, the 100.98 late April 2020 and the 101.03 early April 2020 highs. Then there are the January 2017 and March 2020 highs at 103.80 to 103.82.
Potential slips should find support between the 22 March high at 98.94 and the 25 March 98.40 low.
Only a false breakout and subsequent slide through the late March low at 97.69 would negate the current bullish picture and instead put the January high and 55-day simple moving average (SMA) at 97.39 to 97.28 back on the map.
Take your position on over 13,000 local and international shares via CFDs or share trading – and trade it all seamlessly from the one account. Learn more about share CFDs or shares trading with us, or open an account to get started today.
IGA, may distribute information/research produced by its respective foreign affiliates within the IG Group of companies pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the research is distributed in Singapore to a person who is not an Accredited Investor, Expert Investor or an Institutional Investor, IGA accepts legal responsibility for the contents of the report to such persons only to the extent required by law. Singapore recipients should contact IGA at 6390 5118 for matters arising from, or in connection with the information distributed.
The information/research herein is prepared by IG Asia Pte Ltd (IGA) and its foreign affiliated companies (collectively known as the IG Group) and is intended for general circulation only. It does not take into account the specific investment objectives, financial situation, or particular needs of any particular person. You should take into account your specific investment objectives, financial situation, and particular needs before making a commitment to trade, including seeking advice from an independent financial adviser regarding the suitability of the investment, under a separate engagement, as you deem fit.
No representation or warranty is given as to the accuracy or completeness of this information. Consequently, any person acting on it does so entirely at their own risk. Please see important Research Disclaimer.
Please also note that the information does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. Any views and opinions expressed may be changed without an update.
Start trading forex today
Trade the largest and most volatile financial market in the world.
- Spreads start at just 0.6 points on EUR/USD
- Analyse market movements with our essential selection of charts
- Speculate from a range of platforms, including on mobile
Live prices on most popular markets
- Forex
- Shares
- Indices
See more forex live prices
See more shares live prices
Prices above are subject to our website terms and agreements. Prices are indicative only. All shares prices are delayed by at least 15 mins.
See more indices live prices
Prices above are subject to our website terms and agreements. Prices are indicative only. All shares prices are delayed by at least 20 mins.