DXY: US dollar index under pressure as focus shifts to Biden agenda
- The US dollar index is falling as traders react to the Joe Biden victory.
- Focus now shifts to the senate, which will probably remain in Republican control.
- The most important data this week will be US inflation numbers.
The US dollar index (DXY) is down by more than 0.15% as traders react to the outcome of the US election. It has declined for the past three consecutive days and is trading at $92.18, which is the lowest it has been since September 2.
Biden elected president
Joe Biden was declared the winner of the US election on Saturday after he crossed the vital 270 electoral college votes. He is now the president-elect until he is sworn in on January 20.
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The dollar index has been falling after it became clear that he was extending the lead next week. This decline is mostly because, the election, which is a key risk in the market has been completed.
Focus will now focus on the Joe Biden agenda. In the campaign, he promised to implement several left-leading policies including tax hikes for companies and the wealthy. He also pledged to spend trillions of dollars in boosting America’s infrastructure and its battle against climate change. On healthcare, he promised that he will lower the cost of prescription drugs and boosting Obamacare.
However, he faces an uphill task in most of these policies because of the Senate, which will be required to pass some of these goals. For example, to hike taxes for any group, he will require a majority in the senate, which Democrats lack. Similarly, he will face challenges raising funds to invest in infrastructure since Republicans are not keen on adding more debt.
US inflation data eyed
This week, the dollar index will also react to the upcoming US inflation numbers and a statement by Jerome Powell and other Fed officials. Powell will participate in the European Central Bank’s (ECB) annual forum that will take place virtually. This forum will come a week after the bank left interest rates unchanged.
Also, the DXY will react to inflation numbers from the US that will come out on Thursday. Analysts polled by Reuters expect that the monthly consumer prices rose by 0.2% in October. That will be the fifth straight months of gains. However, the annual rate of inflation will remain below 2%.
US dollar index technical outlook
The dollar index is trading at $92.16, which is the lowest it has been since September. On the daily chart, this price is below the 25-day and 15-day exponential moving averages (EMA). It is also eying a low of $91.75, which is the year-to-date low. The Relative Strength Index (RSI) has also moved below 40, which is a signal that the price will continue falling. Get started in forex by reading our comprehensive forex brokers reviews.