- The US dollar index is recovered to around 98.25 in the first bars of the European session on Friday.
- The negative perspective of the index remains active below the 100 -day EMA with a bearish RSI indicator.
- The first level of support to watch is 98.00; The first upward barrier is observed at 99.38.
The US dollar index (DXY), an index of the value of the US dollar (USD) measured against a basket of six world currencies, bounces about 98.25, breaking the two -day loss streak during the early European session on Friday. The state of risk aversion amid the growing geopolitical tensions in the Middle East provides some support to the US dollar (USD) in general.
According to the daily chart, the DXY bassist inclination remains intact since the index is maintained below the average exponential (EMA) mobile key of 100 days. In addition, the downward impulse is supported by the 14 -day relative force (RSI) index, which is below the midline about 39.50, supporting sellers in the short term.
The initial support level for the USD index arises in 98.00, representing the lower limit of the Bollinger band and the psychological brand. Further south, the next level of containment is observed in 97.61, the minimum of June 12. The additional filter to be monitored is 96.55, the minimum of February 25, 2022.
On the positive side, the first upward barrier for the DXY is located at 99.38, the maximum of June 10. Any additional purchase above this level could pave the path to the key resistance level of 100.00. A decisive breakdown above the mentioned level could see a rebound around 100.40, the upper limit of the Bollinger band.
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.
