- The US dollar index falls 0.21% as US bond yields decline.
- The yield on 10-year US Treasuries lost about 2 bps to 1,388%.
The US Dollar Index, also know as DXY, which measures the performance of the dollar against a basket of six rivals, falls 0.33%, settling at 96.48 during the American session at the time of writing this article. Market sentiment is pessimistic, with major US stocks falling between 1.51% and 2.86%.
Factors such as US President Biden’s failure to get Democratic Senator Joe Manchin to back his $ 2 trillion in taxes and spending clouded the outlook for the dollar, amid falling US bond yields. That said, Goldman Sachs lowered US economic growth forecasts after Senator Manchin’s decision.
In the US bond market, Treasury yields fall with 2-, 5-, and 10-year yields falling between one and four basis points, settling at 0.6155%, 1.1391% and 1.388%. The long maturity of the yield curve, with yields at 20 and 30 years, fluctuates. 20-year yields are flat at 1.8585%, while 30-year yields rise almost 1bp, to 1.823%
Last week, the main event for the US dollar was the Federal Reserve’s monetary policy decision. The US central bank kept its interest rates unchanged in the range of 0 to 0.25% while increasing the speed of the bond reduction, from the 15 billion dollars initially agreed to 30 billion dollars, to as of mid-January 2022.
In addition, it published its Summary of Economic Projections, also known as SEP. Inside that report is the “famous” dot plot, showing the projections of the 18 members of the Federal Reserve Board for Federal Funds Rates (FFR) in the current and subsequent years. In this report, US central bank policymakers expect three rate hikes by the end of 2022, projecting the FFR at 0.90%.
US Dollar Index (DXY) Price Forecast: Technical Outlook
The daily chart of the US Dollar Index shows the strong dollar narrative staying in place. Price is above the central Pitchfork uptrend channel, which meets the ascending triangle in an uptrend. At press time, the DXY is testing the upper trend line of the ascending triangle in an uptrend, although it crossed the aforementioned earlier and hit a daily low at 96.33.
To the upside, the first resistance would be the figure at 97.00. A breach of the latter would expose the June 30 high at 97.80, followed by the ascending triangle target at 98.00.
Additional technical levels
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