The US Dollar Index (DXY) edged lower on Friday, trading near the 106.00 level as US markets reopened after the Thanksgiving holiday. While the greenback has been supported by the Federal Reserve’s hawkish stance and robust US economic data, a lack of significant market-moving events kept the currency under pressure.
The US Dollar Index (DXY) hovered near 106.10 on Friday, paring earlier losses that had dipped below the 106.00 level. While profit-taking and geopolitical tensions weighed on the greenback, its bullish trend remains intact, underpinned by strong US economic data and a hawkish Fed. Reduced trading volumes due to the Thanksgiving holiday limited market activity, but the DXY is poised to extend its upward momentum.
Fundamental Analysis: US Dollar Index (DXY)
The US Dollar Index (DXY) is currently trading near the 106.00 level, after a slight dip earlier in the week. The Greenback has recovered since the reopening of US markets on Black Friday, as the Euro’s recent rally, which had pressured the USD, has begun to subside.
Key Factors Influencing the DXY:
- Fed’s Hawkish Stance: The Federal Reserve’s persistent hawkish stance continues to support the US Dollar. The recent release of the Federal Open Market Committee (FOMC) minutes suggested that the Fed is in no rush to cut interest rates, despite some participants expressing concerns about potential disinflation.
- Market Expectations: The CME FedWatch Tool indicates that market participants now assign a 66% probability to a rate cut in December, up from previous estimates. This shift in expectations could impact the DXY’s trajectory.
- Technical Adjustments: The FOMC discussed a “technical adjustment” to money market operations, which could have implications for short-term interest rates and the US Dollar’s value.
While the DXY has shown resilience in the face of recent market volatility, traders should closely monitor developments in US economic data, Fed policy decisions, and geopolitical events for potential impacts on the currency pair.
Technical Indicator on Dollar Index
The indicators, particularly the Bollinger Bands, suggest consolidation in today’s trading session. The Dollar Index (DXY) has leaned slightly in favor of the bears since Monday, following the market’s peak at 108 on Wednesday, which marked a strong bearish reversal that pulled the price down to the 106 threshold. Currently, the candlestick is exhibiting consolidation characteristics slightly below 106, precisely at 105.8.
Key support for the DXY lies between 106.00 and 106.50, while resistance is capped at 108.00, the level reached last week Friday. The bullish trend is expected to persist in the medium term, supported by a robust U.S. economy and potential shifts in Federal Reserve rate cut expectations. However, a break below 106.00 could signal the beginning of a downside correction.
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