Dollar Index Rises After First Weekly Gains Since July. Is This The Beginning Of Something Special?

The dollar Index rose more than one percent against major currencies. The dollar rebounded sharply this week as economic resilience prompted investors to lower expectations that the central bank could start cutting interest rates as early as the first quarter of 2024. Adding to this, higher US yields also supported the sentiment.

Dollar index was settled at 102.436 compared to 101.3790 at the end of last week. It was the highest since mid-July at 4,444.

 The return and rise of the dollar index came after data showed the US economy added 216,000 jobs in December, beating the consensus estimate of 170,000. Percent. Separate data from the Labour Department showed that the number of people leaving their jobs fell to the lowest level since 2021 in November, while the number of US jobs fell to the lowest level in nearly three years.

Over the weekend, the currency reacted neutrally after rallying in response to mixed data that showed weaknesses in the world’s largest economy, but remained resilient overall.

Additionally, a Fed official signalled satisfaction with cooling inflation last week and predicted no rate hikes until 2024, suggesting a 75-basis point cut. So far, market forecasts point to a rate cut in March, followed by another in May, and such a position signals a bearish trend for the US dollar, as lower interest rates could divert liquid capital to higher yield markets.

US CPI and PPI numbers will be released this week which could have a strong impact on the dollar and the dollar index.

Technical Outlook – Dollar Index:

The dollar index rose to 103.101 points and reached 102.4350 points, gaining 1.02%. The currency posted its biggest weekly gain since mid-July 2023.

As of October 30, 2023, the dollar continued to trade with negative momentum. The currency fell more than 5%, retreating from a high of 107.3480 to a low of 100.6170, close to a nine-month low.

On the chart above, the greenback is trading above key support at 101.20. Further, after nine straight weeks of decline, it managed to make a slightly positive candlestick, which may indicate a temporary rally in the coming days.

However, the long-term trend is likely to remain negative in an anticipation that the Fed does not raise rates again in 2024. Therefore, we expect the dollar to rise to a limited extent to 103.1550 coincided with 10 SMA.

Further, if break and sustain then next resistance will see at 104.100. From which, pressure might  seen towards 101.7050-100.9050.

Commodity Samachar
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