DXY dollar index could fall below 105, but it is unlikely to be sustainable – ING

The DXY Dollar Index remains lower and continues its downtrend despite the low trading activity during Thanksgiving. However, ING economists do not expect the DXY index to sustainably trade below the 105 level.

The dollar is well related to the Fed

The degree of caution displayed by Fed officials Following softer CPI numbers means markets may be reluctant to further downgrade their expectations of a near-term rate spike. This means that a one-way trade in the currency market, in which the dollar maintains a downward trend for longer, still seems unlikely.”

The dollar has already absorbed a fair amount of negatives in regards to the history of the Fed and, in our view, it can still benefit from deteriorating prospects outside the US. (especially in Europe and China) in the coming months.”

“Although we do not exclude that the contraction of the dollar will take the DXY index below 105.00, we struggle to see levels below 105.00 hold for long“.

Source: Fx Street

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