Fri, December 01, 2023

U.S. Dollar Index is Looking for a Direction


The U.S. Dollar Index was struggling to find a way, as it exchanged gains with losses ahead of the opening bell in Euroland on April 22. Two days ago, the index which tracks the greenback vs. a basket of its major rivals declined to fresh lows in the 90.90/85 band. Nevertheless, it managed to regain some mild upside traction, but it ran out of steam in the 91.40 on Wednesday.

In addition, shrinking U.S. yields removed strength from any bullish attempt when it came to the dollar. The yields of the key U.S. 10-year benchmark prolonged the monthly leg lower and slipped back to the 1.53% area so far, levels last visited in mid-March.

There are several important factors that have the potential to affect the dollar index. The weekly initial unemployment claims belong to that category. Another important factor is the Chicago Fed National Activity Index. Let’s not forget about the CB Leading Index.

The Dollar Index and various factors

The U.S. Dollar Index managed to regain some of its strength after falling below 91.00 levels earlier in the week. The mega-competitive stance from the Federal Reserve also affected the situation and hopes of a strong global economic recovery also played an important role.

The Dollar index added 0.2% to reach 91.12 and a break above 91.64 would open the door to 92.11.

USD/JPY price analysis

USD/JPY is still under the risk of further decline in the short-term horizon. The outlook for the U.S. dollar still appears to be on the soft side buy any weakness is unlikely to dislodge the major support at 107.65. Nevertheless, USD traded in a relatively quiet manner between 107.86 and 108.28 before closing at 108.05 on Wednesday. The underlying tone still appears to be somewhat soft but any weakness is regarded as part of a lower range of 107.80/108.25. It means that a clear break is unlikely to happen.

The U.S. dollar traded in a quiet manner and our latest narrative from Tuesday (20 April, spot at 108.15) still stands. As mentioned above, USD is likely to weaken further but the major support at 107.65 may not come into the picture soon. On the upside, a break of 108.55 would indicate that the pullback in USD started about two weeks ago has run its course. Looking ahead, the next support level below 107.65 is at 107.30.


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