The Greenback Blessed the Fed for Its Best Week in Seven Months
The Greenback turned even greener as the U.S. Dollar index (DXY) jumped to 97.33 - a record high that has not been reached since July 2020 - and performed the best upside weekly jump in the last seven months after the Federal Reserve (Fed) chief Jerome Powell bet on five or more interest rate hikes in 2022. The American currency rocketed the Euro, the British Pound, and the Yen after Powell’s press conference provided news that the Fed will put forward faster than expected interest rate hikes this year.
A continuation pattern formed on the DXY daily chart. First, from November 24, 2021, until January 13, 2022, it looked like a triangle, but now it is more like a “flag” pattern. The upward trend that began in May 2021 has been sustained even when the index scaled back to 94.61 points. On the contrary, this scale back formed another important support for it.
Now, as we received a clear upside signal, we may suggest a 60% flagstaff upside target for the DXY at 98.30-98.40 points, and 99.80-100 points if we consider the height of the whole pattern.
“The dollar is on cycle highs and has further to go as rate differentials and increased levels of market volatility provide support. But this is the last stage of the move,” said Societe Generale strategist Kit Juckes.
So, we may expect the U.S. Dollar and DXY to climb up to 100 points, but less demand for the Greenback could be seen close to this landmark as markets are always considering possible future risks and pricing in a possible future outlook. Thus, expectations of an aggressive stance of the Fed may be well priced in and further reasons for the U.S. Dollar rally may not appear on the horizon.
A continuation pattern formed on the DXY daily chart. First, from November 24, 2021, until January 13, 2022, it looked like a triangle, but now it is more like a “flag” pattern. The upward trend that began in May 2021 has been sustained even when the index scaled back to 94.61 points. On the contrary, this scale back formed another important support for it.
Now, as we received a clear upside signal, we may suggest a 60% flagstaff upside target for the DXY at 98.30-98.40 points, and 99.80-100 points if we consider the height of the whole pattern.
“The dollar is on cycle highs and has further to go as rate differentials and increased levels of market volatility provide support. But this is the last stage of the move,” said Societe Generale strategist Kit Juckes.
So, we may expect the U.S. Dollar and DXY to climb up to 100 points, but less demand for the Greenback could be seen close to this landmark as markets are always considering possible future risks and pricing in a possible future outlook. Thus, expectations of an aggressive stance of the Fed may be well priced in and further reasons for the U.S. Dollar rally may not appear on the horizon.
