US dollar index ends week higher but limited by 101.50

The US dollar rose marginally against most of the currencies during the week. The Dollar Index was up for the third week in a row, posting minor gains thanks to a rebound that took place during Friday’s American session. 

The DXY bottomed at 100.60, hitting the lowest in a week but then bounced, rising back above 101.00. The recovery of the USD pushed the index back above the level it closed last week. 

The best performer in the currency market during the last five days has been the Mexican peso, supported by the announcement of a new FX program from Banxico and the improvement in the tone of the relations between US and Mexico. On the opposite, the euro fell across the board, as it remains under pressure amid political uncertainty in Europe.

DXY Technical level 

Despite posting three consecutive weeks of gains, the upside remains limited by the 101.50 - 101.70 area, that has become a key resistance that since January 13 is capping the upside. A break and a consolidation on top could lead to another rally. 

But as long as it remains below, the probability of a bearish correction would remain intact. At 100.50 (20-day moving average) the index has an important short-term support; below that area, February lows around 99.10/15, would be exposed. 

Greenback support by data and the Fed

Economic data form the US continues to show a solid labor market and inflation trending to the upside. The rise in inflation, according to Yellen is due mostly to temporary factors. Despite that statement, she and others members of the FOMC expect to raise rates several more times during 2017. 

Those expectations continue to support the US dollar in the market. The next FOMC meeting will be Marc 14 - 15. Next week, among the most important events, will be the speech of Donald Trump to the joint session of Congress, next Tuesday.