- The US dollar index recovers part of the lost terrain to approach 103.50 in the early European session on Wednesday, adding 0.21% in the day.
- The negative perspective of the index remains intact below the 100 -day EMA with a bearish RSI indicator.
- The initial downward objective to be observed is 103.20; The first upward barrier is seen in 104.10.
The American dollar index (DXY), an index of the value of the US dollar (USD) measured against a basket of six world currencies, attracts some buyers around 103.50 during the early European session on Wednesday. Operators prepare for the Federal Reserve Interest Decision (FED) later on Wednesday, without changes in the expected rate.
The new economic projections of the FED officials will be observed closely, since they could offer some clues on how those responsible for policies see the probable impact of the administration policies of US President Donald Trump.
Technically, the dxy bassist perspective remains, characterized by the index by maintaining the average exponential (EMA) medium key of 100 days in the daily time frame. The lower resistance path is down, since the 14 -day relative force (RSI) index, which is below the midline about 31.15, supports sellers in the short term.
In the bearish event, the minimum of March 18 in 103.20 acts as an initial support level for the USD index. The crucial containment level to observe is 102.00, representing the psychological level and lower limit of the Bollinger band. Extended losses could see a fall to 100.53, the minimum of August 28, 2024.
On the positive side, the immediate resistance level for the DXY arises in 104.10, the maximum of March 14. Further north, the following obstacle is seen in 105.45, the maximum of November 6, 2024. Any monitoring purchase above this level could see a rebound at 106.10, the EMA of 100 days.
DAILY GRAPH OF THE US DOLLAR INDEX (DXY)
US dollar FAQS
The US dollar (USD) is the official currency of the United States of America, and the “de facto” currency of a significant number of other countries where it is in circulation along with local tickets. According to data from 2022, it is the most negotiated currency in the world, with more than 88% of all global currency change operations, which is equivalent to an average of 6.6 billion dollars in daily transactions. After World War II, the USD took over the pound sterling as a world reserve currency.
The most important individual factor that influences the value of the US dollar is monetary policy, which is determined by the Federal Reserve (FED). The Fed has two mandates: to achieve price stability (control inflation) and promote full employment. Its main tool to achieve these two objectives is to adjust interest rates. When prices rise too quickly and inflation exceeds the 2% objective set by the Fed, it rises the types, which favors the price of the dollar. When inflation falls below 2% or the unemployment rate is too high, the Fed can lower interest rates, which weighs on the dollar.
In extreme situations, the Federal Reserve can also print more dollars and promulgate quantitative flexibility (QE). The QE is the process by which the Fed substantially increases the flow of credit in a stuck financial system. It is an unconventional policy measure that is used when the credit has been exhausted because banks do not lend each other (for fear of the default of the counterparts). It is the last resort when it is unlikely that a simple decrease in interest rates will achieve the necessary result. It was the weapon chosen by the Fed to combat the contraction of the credit that occurred during the great financial crisis of 2008. It is that the Fed prints more dollars and uses them to buy bonds of the US government, mainly of financial institutions. Which usually leads to a weakening of the US dollar.
The quantitative hardening (QT) is the reverse process for which the Federal Reserve stops buying bonds from financial institutions and does not reinvote the capital of the wallet values that overcome in new purchases. It is usually positive for the US dollar.
Source: Fx Street
I am Joshua Winder, a senior-level journalist and editor at World Stock Market. I specialize in covering news related to the stock market and economic trends. With more than 8 years of experience in this field, I have become an expert in financial reporting.
