- Summary:
- The US dollar index (DXY) is rising today after dropping to a multi-year low. Has the index finally turned the page or is this a dead cat bounce?
The US dollar index (DXY) is bouncing back as the market reacts to the new stimulus deal in the United States. The index is trading at $90.45, which is slightly higher than the year-to-date low of $89.73.
What’s happening: All constituents of the dollar index are falling today, pushing it higher. The sterling has fallen by more than 1% while the euro has declined by 0.55%. The Swedish krona, which is also part of the index, has declined by more than 0.85%. Similarly, the Japanese yen and Swiss franc have fallen by about 0.40%.
Why’s this happening: There are two primary reasons why the dollar index is rising. First, a new strain of coronavirus has emerged, putting more people at risk. It has already been confirmed in the United Kingdom, South Africa, Netherlands, and Belgium.
Indeed, it has forced the UK to start implementing a new lockdown. Second, the dollar index is probably reacting to the new stimulus deal in the United States.
Dollar index forecast: On the four-hour chart, we see that the dollar index bottomed at $89.73 last week. Today, it has continued rising and moved above the 25-day and 15-day exponential moving averages. The Relative Strength Index (RSI) has also moved from the oversold level of 27 to the current 56.
Notably, it is approaching the descending trendline that’s shown in red. Therefore, the index will remain in a downtrend so long as it is below this trendline. At the same time, a move above this line will see it continue rising.
US dollar index technical chart
