DXY: Dollar index forecast ahead of Jerome Powell testimony
- The US dollar index tilted upwards on Monday.
- This is after the index dropped sharply on Friday.
- We explain why the bullish trend will likely remain.
The US dollar index (DXY) attempted to bounce back as the market reflected on the new Omicron variant. The index is trading at $96.25, which is a few points above last Friday’s low of $95.92.
Omicron and the US dollar
The US dollar index crashed hard on Friday after South Africa announced the rising spread of the new variant known as Omicron. The index dropped as the US dollar declined sharply against the euro. It managed to rise against other key currencies like the Canadian dollar and the Japanese yen.
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The DXY index started the week on a positive note as investors reflected on the new Covid-19 threats. Omicron has already travelled in more countries like the United Kingdom, Netherlands, and Australia. Analysts expect that the virus has already reached the US.
Still, there is a sense in which the market likely overreacted about the impacts of this variant. This explains why global stocks have bounced back today. Futures tied to the Dow Jones, Nasdaq 100, and S&P 500 have all bounced back. The same is true among those tied to the DAX and FTSE 100.
The dollar index will today react to several events. First, since the euro is its biggest constituent, the index will react to flash inflation numbers from Germany and Spain. Analysts expect these numbers to show that these countries’ inflation rose by more than 5% in November.
In the United States, the National Association of Realtors will publish the latest pending home sales numbers. These numbers are expected to show that the country’s property market did well as sales rose by 1%.
Meanwhile, Fed’s Jerome Powell and Treasury’s Janet Yellen will testify before Congress on the CAREs act. This will be the first statement by Powell after being reappointed.
US dollar index forecast
The daily chart shows that the US dollar index has been in a bullish rally recently. This rally accelerated when the index rose above the key resistance level at $93.33. This price was along the upper side of the double-bottom pattern.
Since then, the DXY has moved above the 25-day and 50-day moving averages. The Relative Strength Index (RSI) has also been bullish. It is also along the 50% Fibonacci retracement level. Therefore, the index will likely keep rising as bulls target the key resistance level at $100.
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