DXY: A move to 2021 lows appears premature – UOB

Quek Ser Leang at Golbal Economics & Markets Research reviews the prospects for the US Dollar Index (DXY).

Key Quotes

“In our Chart of the Day update from a month ago (30 Mar 2021), when USD Index was trading at 92.94, we were anticipating a break of the 55-week exponential moving average (at 93.40 then). We highlighted that “a weekly closing above this key resistance would greatly increase the odds for further USD Index strength in the coming months”. USD Index subsequently advanced a few pips above the moving average (high of 93.44) before making a swift and sharp turnaround. Not surprisingly, weekly MACD has weakened but currently, it is still in positive territory.”

“While the sharp retreat from the moving average has shifted the risk to the downside, it is premature to expect USD Index to move to the early Jan low of 89.21. To look at it another way, we do not view the current weakness as a resumption of the USD downtrend that started last year. That said, USD Index could dip below the rising trend-line support (currently at 90.25) but only an unlikely weekly closing below the Feb’s low of 89.68 would suggest that the year-to-date low at 89.21 is at risk. All in, USD Index is expected to stay under pressure unless it can move back above 92.50. Higher up, the 55-week exponential moving average is still acting as a key resistance (currently at 93.17).”