The US Dollar Index (DXY) has surged higher after breaking above a major barrier at 94.47/80. Analysts at Commerzbank predict that the DXY will reach 99.50 and that it will have a chance to rise over the 100 level.
The DXY has broken through significant resistance at 94.47/80. It is supported by the 93.96 2021 upswing, and if the price of the US Dollar rises over this level, they will seek additional increases to the 97.73 Fibonacci barrier level.
Analysts are also over the 55-month moving average and have mostly based their predictions on it. The base is approximately 99.50 inches in diameter.
Longer-term, there is potential for the 100+ level and perhaps the 103.00/103.80 highs.
So far on Wednesday, the index has traded in an indecisive manner, even though it is still traversing the higher end of the previous range at the recent cycle highs of approximately 96.60, which were established on Tuesday.
Review Of The Fundamentals
The currency’s minor retreat from recent 2021 highs is a reaction to the so-far knee-jerk increase in US rates throughout the curve, which has resulted in the currency giving up a portion of its recent rise at the same time.
It is worth noting that rates in the US cash markets gained more impetus in reaction to the re-appointment of Chairman Powell to the Federal Reserve Board of Governors.
Aside from higher rates, the Dollar continues to gain strength from expectations of a Federal Reserve rate hike sooner than expected in the present environment of persistently increased inflation, which has kept the currency strong.
Atlanta Fed President R. Bostic urged on Tuesday for a faster pace of QE reduction, which he believes will pave the way for earlier interest rate rises in the future.
Because of key releases later in the NA session, including original claims, core PCE, flash third-quarter GDP, the last consumer perception, durable goods orders, new home revenues, and personal revenue and expenditure, the Greenback has taken a cautious stance in the wake of the FOMC Minutes from the November 2-3 meeting.
What To Watch For In The USD
DXY CHART Source: Tradingview.com
Previously in the week, the index reached fresh cycle highs at 96.60, before falling a touch lower in the following days.
The “higher-for-longer” narrative around present increased inflation, which in turn gives wings to US yields and strengthens speculation of a sooner-than-expected interest rate hike by the Federal Reserve, continues to sustain the intense surge upward in the Dollar.
Indeed, investors expect the Federal Reserve to raise interest rates in June, September, and December of 2022. Support for the Dollar comes in the form of a strong rebound in the labor market, President Biden’s infrastructure program, and encouraging outcomes in the United States’ basic statistics.
Currently, the index is up 0.01% at 96.49, and a breach above 96.60 (2021 high on Nov. 23) would unlock the door to 97.00 (rounded level) and then 97.80.
On the other hand, the next downward resistance level appears at 95.51 (low of November 18), trailed by 94.96 (weekly low of November 15), and finally 94.56 (monthly high of October 12).