The US dollar index (DXY) had a strong performance in February in light of the strong economic numbers from the US and the crisis in Europe. It is trading at $96.88, which is about 2.35% above the lowest level this year.
US dollar safe haven
The US dollar index rallied in February after the strong economic numbers from the US. In the first week of the month, data revealed that the American economy added more than 467k jobs in January and over 500k in the previous month.
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In the following week, the US published strong consumer and producer inflation numbers that showed that inflation continued rising in January. The bureau attributed the strong performance to the rising oil and gas prices and the ongoing supply chain challenges.
Additional data showed that the American retail sales continued doing well in January after they retreated sharply in the previous month.
All these numbers pointed to the fact that the Federal Reserve will embrace a more hawkish tone in the coming months. Analysts expect a series of rate hikes in the coming months and the abandonment of quantitative easing (QE). The rate hikes will likely be in batches of either 25 or 50 basis points.
The US dollar index also rose sharply as investors reacted to the ongoing crisis in Europe. In a video message, President Vladimir Putin of Russia ordered a special military operation in Ukraine as he opposed the ongoing expansion of NATO in the region.
In times of crisis, investors tend to move to the safety of the US dollar. Sadly, the situation will continue in the coming months as Russia continues to attack Ukraine. The first day of talks ended without an agreement on how to end the current war.
US dollar index forecast
The four-hour chart shows that the US dollar index soared to a high of $97.75 in February. This was the highest it has been in months. The price remains slightly above the 25-day and 50-day moving averages. It is also slightly below the important resistance level at $97.45, which was the highest point in February.
Therefore, the DXY index will likely resume the downward trend as bears target the next key support level at $96.50 ahead of the upcoming US employment data and the Fed decision that is scheduled for mid this month.
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Source: https://invezz.com/news/2022/03/01/dxy-us-dollar-index-forecast-as-the-russian-invasion-continues/