MUFG Bank Analysts They expect the US dollar to remain offered in the short term, but concerns about global growth and a tighter policy from the Federal Reserve should subside by the end of this year. They mentioned that the rally in the US Dollar Index (DXY) is approaching key resistance levels near last year’s high of 93.43; They see that a strong rally in USD shorts has bolstered the bullish momentum, but it should be less important going forward.
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“The USD has continued its advance this month helping to lift the dollar index back to close to the year-to-date high of 93,437 since the end of March. After hitting a low on May 25, the dollar index has strengthened around 3.5% and has returned to trading at levels that were before last year’s US presidential election between 92,000 and 94,000. The upside momentum in the USD has been bolstered by a sharp reduction in short positions over the past month among asset management / institutional and leveraged funds which have fallen to their lowest levels for the year. “
“The first stage of the USD rally was fueled by the Fed’s policy update as short-term US yields rose.”
“Concerns about global growth have more recently become the strongest USD main driver. The next FOMC meeting could shift the market’s focus back to Fed policy and plans for QE phasing out. “
“We expect the USD to remain offered through the summer as global growth support and concerns about tightening Fed policy remain the focus. However, we expect both concerns to subside by the end of this year, which will result in a reversal of the USD strength. “
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