US Dollar Outlook on Economic Impact of Fed Shells Dollar

US Dollar Fund Predictable Bullish

  • A flat product curve precludes dollar expectations.
  • Economic recovery next week.

DXY Basic Background

The US economy is showing strong performance metrics, especially in the labor market. Coupled with the falcon central bank in the midst of high inflation, the green backbone is yet to emerge, as many expect. In the 2022 markets, there will be approximately four price increases (see table below) in a 97% Opportunity for January meeting.

Opportunities for Increased Speed

Source: Refinitiv

With this strong tightness on the cards, the bond markets are relatively quiet and the flat curve of the 2s10s (the difference between long and short term bonds) indicates that the markets are worried about the future of the US economy. High interest rates and the federation’s desire to reduce the bubble balance could hurt its economic growth. So the markets want to make big profits instead of adding to the already extended dollar lengths. That being said, the fall in the dollar index (DXY) may be short-lived because the overall outlook remains bleak.


American Product Curve

Source: Refinitiv

Next week’s dollar economy calendar is easy without any major announcements. This should allow markets to consolidate last week’s data and focus on the wider macroeconomic environment. Martin Luther King Jr.’s Jr. Day will result in a slim trading volume on Monday the 17th of next week, so expect big market activity no matter what happens during the weekends and holidays.

Technical analysis

US Dollar Index Daily Chart

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Table by Warren Venketas, IG

This week’s key sell-off mid-trend support (black) did not prevent further downward trend. This exciting break will open the door for further support for further dollar discounts. At this point, if Friday’s candle is closed above 95.00’s psychological control, the break may be considered a false alarm. Similarly, if prices hover below 95.00 and slide up after a few trading days, the same principle applies.

The Relative Strength Index (RSI) further supports this view with the speed indicator coming in at the over-selling levels.

Levels of resistance;

  • 96.01 (50% Fibonacci)
  • 95.00


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