US Dollar Trend: Bullish
- The US dollar, as measured by the DXY index, rose for another positive week. This was driven by higher treasury rates.
- Bond yields jump on hotter-than-expected US inflation data.
- Stubbornly high inflationary pressures will keep the Fed moving to raise interest rates further. to support the dollar
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Most read: US Inflation at 8.2%, Dollar and S&P 500 on Divergent Path on Hot CPI
The US dollar, as measured by the DXY index, rose last week. It rose about 0.45% to 113.25 before the weekend. This was triggered by US Treasury yields. That increased according to US inflation data. That was hotter than expected, while the annual headline CPI slowed slightly in September. Core values increased to their highest since 1982, rising to 6.6 per cent from 6.3 per cent in August. This is an indication that price pressures remain high in the economy.
With inflation risks tilted to the upside The Fed is likely to continue raising interest rates before the next few months. Although the proactive cycle of tightening creates a painful recession, in reality, policymakers are less concerned about rapidly declining growth patterns. and it appears to prioritize price stability in its mandate.
in the current environment It would not be surprising if expectations for final FOMC rates were slightly higher than what was seen in futures markets. And traders are starting to break their stance on tighter and longer monetary policy, eliminating the “spin theory” for now. This situation is likely to benefit the US dollar. as long as it keeps bond yields trending while strengthening. A currency’s “insurance premium” over global competitors
2023 FED Futures Implied Rates
Source: TradingView.
In terms of technical analysis, the DXY index is slightly below the key resistance near 113.85 after Friday’s advance. If the bull can push the price above this barrier in the upcoming session. We may see a move towards a multi-decade high of 114.77, followed by 116.40, which is the upper limit of the short-term bullish wedge. Initial support will appear at 111.00/110.90 on further weakening The focus moves below 109.80.
US Dollar (DXY) technical chart
DXY charts prepared using TradingView.
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— Written by Diego Colman, DailyFX Market Strategist.
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