US Dollar Index (DXY) Slowly Approaches Make or Break Price
The US dollar index (DXY) is a measure of the value of the US dollar against a basket of six major currencies. It is one of the most widely used indicators of the strength or weakness of the greenback in the global market. Recently, the DXY has been under pressure as investors await important economic data and policy decisions from the US.
In this article, we will look at some of the factors that are influencing the DXY and what to expect in the near future. We will also provide some technical analysis and tips on how to trade the DXY using Invezz, a platform that offers instant updates and insights on various financial markets.
What is driving the DXY lower?
There are several factors that are weighing on the DXY in the past few days. Some of them are:
- US inflation data: The US consumer price index (CPI) data for March is scheduled to be released on Wednesday, April 12. This is a key indicator of inflationary pressures in the US economy, which can affect the monetary policy stance of the Federal Reserve. Analysts expect the CPI to decline from 0.4% in February to 0.2% in March on a monthly basis, and from 6.0% to 5.2% on a yearly basis. A lower-than-expected inflation reading could signal that the Fed will maintain its accommodative stance and delay any rate hikes, which would be negative for the US dollar.
- Federal Reserve minutes: The Fed will also publish the minutes of its latest monetary policy meeting on Wednesday. The minutes will provide more details on what the Fed officials discussed and decided at their March meeting, when they raised the benchmark interest rate by 0.25% for the first time this year. The minutes could also offer some clues on what to expect from the Fed in the coming months, especially regarding its balance sheet reduction plan and its outlook for inflation and growth. Any dovish signals from the Fed could undermine the US dollar's appeal.
- Bank earnings season: The US bank earnings season will kick off on Friday, April 14, with some of the major banks such as JPMorgan Chase, Wells Fargo, and Citigroup reporting their first-quarter results. These earnings reports could have an impact on the US dollar as they reflect the health and performance of the US financial sector, which is closely linked to the broader economy. If the banks report strong earnings and upbeat guidance, it could boost market confidence and demand for riskier assets, which would weigh on the safe-haven US dollar.
How to trade the DXY?
The DXY is not a tradable instrument by itself, but it can be used as a reference point for trading other currency pairs that are influenced by the US dollar. For example, if you expect the DXY to rise, you could buy USD/JPY or sell EUR/USD. Conversely, if you expect the DXY to fall, you could sell USD/JPY or buy EUR/USD.
To trade these currency pairs effectively, you need a reliable platform that offers fast execution, low spreads, and advanced tools. One such platform is Invezz, which allows you to access various financial markets with ease and convenience. You can also follow Invezz on Telegram , Twitter , and Google News for instant updates and insights on various financial topics.
What is the technical outlook for the DXY?
The daily chart below shows that the DXY has been in a strong downtrend since last year, when it reached a high of $114.7. It has moved below the 50-day moving average and the Woodie pivot point, indicating a bearish bias. It is also approaching the important support level at $100.73, which is the lowest level this year and a key psychological level.
If the DXY breaks below this support level, it could signal that sellers have prevailed and open the way for further losses towards the next support levels at $99.50 and $98.00. On the other hand, if the DXY bounces off this support level, it could indicate that buyers are still in control and push the index higher towards the next resistance levels at $103.00 and $104.00.
The RSI indicator is hovering near the oversold territory, suggesting that the DXY could be due for a correction or a consolidation soon. The MACD indicator is in the negative zone and below its signal line, indicating a bearish momentum.
The Bottom Line
The US dollar index (DXY) is facing some headwinds as investors await the US inflation data, the Fed minutes, and the bank earnings season. These events could have a significant impact on the direction and sentiment of the US dollar in the near term. The DXY is also trading near a critical support level at $100.73, which could determine its next move.
If you want to trade the DXY or other currency pairs that are influenced by the US dollar, you need a reliable platform that offers fast execution, low spreads, and advanced tools. One such platform is Invezz, which allows you to access various financial markets with ease and convenience. You can also follow Invezz on Telegram , Twitter , and Google News for instant updates and insights on various financial topics.
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