• The US Dollar Index hits a fresh 25-month courtesy of dismal market mood and expectations of an aggressive Federal Reserve tightening cycle.
  • Most Fed officials aligned to hike 50-bps at the May 4-5 meeting.
  • US Dollar Index Price Forecast (DXY): Bull’s target remains the January 2017 highs near 103.82.

The US Dollar Index, a measurement of the greenback’s value against a basket of six currencies, finished with gains of 0.62% and, at the time of writing, is at 101.735, shy of the 2-year high reached during the day at 101.851.

The market mood remains downbeat, as portrayed by Asian equity futures falling. Growing concerns about China’s coronavirus outbreak In Shanghai extended to some Beijing districts, keeping traders on their toes. Fears of wider curbs in Beijing are spooking investors already worried about the risk of a global slowdown as the Fed raises rates to tame inflation.

Additionally, last week’s Fed speaking increased the appetite for the greenback. Money market futures shows that investors have fully priced in a 100% chance of a 0.50% rate hike in the May meeting, while for June, the odds are at 80%, as shown by the CME FedWatch Tool.

In the meantime,  the 10-year US Treasury yield, the benchmark note, retreated from last week’s highs around 2.981%, is down ten basis points, at 2.818%.

Last week’s Fed speaking summary

On Thursday of last week, Fed Chair Jerome Powell blessed a half-point interest rate increase by the May 4-5 reunion. Furthermore, San Francisco Fed President Mary Daly noted that the Fed “will likely” raise rates by 50 bps at a couple of meetings. Daly reiterated that the Fed needs to take a measured pace on rate hikes and get interest rates up to 2.5% by the end of the year.

Elsewhere, St. Louis Fed President James Bullard admitted that the Fed is behind the curve but not as everybody thinks, while adding that the Fed has hiked 75 bps before without the world coming to an end.

Last Friday, Cleveland’s Fed President Loretta Mester commented that she would like to get neutral to 2.5% by the end of the year. When asked about 75-bps increases, Mester added that “we don’t need to go there.” Furthermore, she supported a 50-bps increase in May and a few more after.

The economic calendar for the US would feature March’s Durable Goods Orders, the US Gross Domestic Product for the Q1, and the Core Personal Consumption Expenditure (PCE) for March on annual and monthly readings, alongside the Chicago PMI.

Analysts at ING expect Q1 data to show the US economy expanded at a 1-1.5% annualized rate, which would be below Q4 of 2021 at 6.9%, reflecting the Omicron wave of the pandemic that impacted mobility considerably.

US Dollar Index Price Forecast (DXY): Technical outlook

The US Dollar Index (DXY) retains its upward bias, as depicted by the daily chart. The 50 and the 200-day moving averages (DMAs) at 98.596 and 95.504, respectively, are well located under the DXY value, further cementing the upside bias. The Relative Strength Index (RSI) at 71.24 is in overbought territory, so a deceleration in the DXY trend is on the cards.

The DXY first resistance would be 102.00. A break above would expose March’s 24 daily high at 102.21, followed by March’s 20 2020 daily high at 102.99 and then the aforementioned 103.82 swing high.

Dollar Index Spot

Overview
Today last price 101.735
Today Daily Change 0.61
Today Daily Change % 0.60
Today daily open 101.13
 
Trends
Daily SMA20 99.74
Daily SMA50 98.49
Daily SMA100 97.24
Daily SMA200 95.48
 
Levels
Previous Daily High 101.34
Previous Daily Low 100.46
Previous Weekly High 101.34
Previous Weekly Low 99.81
Previous Monthly High 99.41
Previous Monthly Low 96.63
Daily Fibonacci 38.2% 101
Daily Fibonacci 61.8% 100.8
Daily Pivot Point S1 100.61
Daily Pivot Point S2 100.1
Daily Pivot Point S3 99.74
Daily Pivot Point R1 101.49
Daily Pivot Point R2 101.85
Daily Pivot Point R3 102.36

 

 

Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.

If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.

FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.

The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.

Feed news Join Telegram

Recommended content


Recommended content

Editors’ Picks

EUR/USD recovers modestly, trades below 1.0700

EUR/USD recovers modestly, trades below 1.0700

EUR/USD has recovered modestly after having dropped to a fresh daily low below 1.0650 in the early American session. With Wall Street's main indexes trading in positive territory, the dollar is struggling to continue to gather strength before the Fed publishes the May minutes.

EUR/USD News

GBP/USD reclaims 1.2500, erases daily losses

GBP/USD reclaims 1.2500, erases daily losses

GBP/USD has regained its traction in the second half of the day and advanced toward the 1.2550 area. The improving risk sentiment seems to be limiting the dollar's gains and helping the pair push higher ahead of FOMC Minutes.

GBP/USD News

Gold: Technicals hint at more slides ahead

Gold: Technicals hint at more slides ahead

Gold is down on Wednesday as the dollar met renewed demand. XAUUSD bottomed during the American session at $1,841.84, holing nearby ahead of the FOMC Meeting Minutes. Generally speaking, investors remain cautious amid signs of slowing economic growth.

Gold News

Terra’s LUNA fork could happen tomorrow, here’s how you need to prepare

Terra’s LUNA fork could happen tomorrow, here’s how you need to prepare

Terra’s LUNA 2.0 testnet is now live, the snapshot could happen on May 26 and the mainnet launch is expected to occur as soon as Friday, May 27, thus completing the LUNA fork.

Read more

FXStreet Premium users exceed expectations

FXStreet Premium users exceed expectations

Tap into our 20 years Forex trading experience and get ahead of the markets. Maximize our actionable content, be part of our community, and chat with our experts. Join FXStreet Premium today!

BECOME PREMIUM

Forex MAJORS

Cryptocurrencies

Signatures