DXY: Dollar index forecast ahead of US consumer confidence data
- The US dollar index found a strong support at the $93.50 level.
- The index has bounced back as odds of Fed tightening have risen.
- It will next react to the latest US consumer confidence data.
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The US dollar index (DXY) made a comeback in the overnight session ahead of the latest US consumer confidence data. The index also rallied after hints emerged that the Federal Reserve will start tapering its asset purchases in the upcoming meeting. It is trading at $93.90, which is slightly above this month’s low of $93.50.
US consumer confidence data
The DXY index rose after the Wall Street Journal (WSJ) reported about the November meeting of the Federal Reserve.
The paper revealed that the Fed Chair, Jerome Powell, had settled to start tapering of the asset purchases in this meeting. The bank will start slowing these asset purchases by about $15 billion per month. The goal will be to end the asset purchases by June next year.
At the same time, the bank could continue tapering these asset purchases while also raising interest rates. In its past interest rate decision, the bank hinted that it would start hiking interest rates in 2024.
The dollar index also rallied as the price of crude oil jumped. Brent, the global benchmark, rose to a multi-year high of $86 while the West Texas Intermediate (WTI) soared to more than $84. Natural gas prices also continued their bullish rally.
The crude oil price jumped after Goldman Sachs said that demand had already risen above where it was before the Covid-19 pandemic. Therefore, investors expect that this rally will lead to more inflation in the United States and around the world.
Looking ahead, the DXY will react to the latest consumer confidence data by the Conference Board. The data is expected to show that confidence declined slightly in October as people continued to worry about inflation.
US dollar index forecast
The four-hour chart shows that the DXY index formed a strong support level at $93.50 this month. It has struggled to move below this level several times before. At the same time, the index moved above the 25-day and 50-day moving averages while the MACD is crossing the neutral line. It is also along the 78.6% Fibonacci retracement level.
Therefore, the index will likely keep rising as bulls target the next key resistance level at $94.50.
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