The US dollar index (DXY) soared to the highest level since 2020 as global volatility accelerated. The index crossed the important resistance level at $100 for the first time in years. It has jumped by more than 12.30% from its lowest level in 2020.
Bond rout continues
The US dollar index soared as the American bond market continued. The yield of the 10-year to 2.85% while the 30-year and 5-year yield rose to 2.84% and 2.83%, respectively. This is the highest the bond yields have been in years.
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The performance of the bond market happens at a time when the Federal Reserve has become more aggressive. Minutes published last week and statements from Fed officials signaled that the bank is considering more tough measures.
According to the minutes, the Fed plans to continue hiking interest rates in the coming months. Some of those rate hikes will be 0.50%. At the same time, the bank hinted that it will start delivering quantitative tightening (QT) measures.
The US inflation numbers to be published today will provide more clues about inflation and the actions of the Fed. Economists polled by Reuters expect the data to show that the headline Consumer Price Index (CPI) rose from 7.9% to 8.4% in March this year. They also expect that the core CPI rose from 6.4% to 6.6%.
If analysts are accurate, these will be the highest numbers in almost 50 years. The data will come a day after the New York Fed warned that sentiment among the public was getting direr. For example, the average estimate is that inflation will continue rising to about 6.6% in March.
The dollar index has soared as the currency has jumped against its peers. For example, the GBP/USD pair has dropped to the lowest point since 2020. The USD/JPY pair has soared to its highest point in 2002 while the EUR/USD pair has dropped in the past four straight days.
US dollar index forecast
The daily chart shows that the DXY index has been in a strong bullish trend in the past few moths. It has formed an ascending channel that is shown in blue. The dollar index has also risen above all moving averages and is approaching the upper side of the channel. The momentum indicator has continued rising.
Therefore, the index will likely keep rising as bulls target the next key resistance to watch will be at $101.
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Source: https://invezz.com/news/2022/04/12/us-dollar-index-forecast-what-next-for-the-dxy-index/