By Samir Al Khoury,
The US Dollar Index, which measures the dollar’s performance against a basket of six major currencies, rose to 106.13 points today, its highest level since May 1, 2024. It is currently hovering around the 106 level. It appears that the level of 106.13 points is a stubborn resistance level, and any breach upwards of this point could reach 106.51 points, which is the level recorded on April 16, 2024.
What Factors Support the Greenback?
Harsh Statements:
The continued hawkish statements of most Fed members support the dollar, suggesting that interest rates will remain high for a longer period of time.
Geopolitical Tensions:
The continuation of geopolitical tensions in the Middle East and the Red Sea, and any expansion of this conflict, could reflect positively on the US dollar, as it is considered a safe haven.
French Elections:
The markets are awaiting the French parliamentary elections that will take place on Sunday. Expectations indicate that both the extreme right and the left will win the majority of seats, which will likely have a negative impact on the euro, which constitutes 57.6% of the weight in the US dollar index.
What Are the Markets Waiting for Today?
Today at 16:30 UAE time, the core personal consumption expenditures (PCE) price index in the United States will be released. This index is a very important indicator preferred by the US Federal Reserve. Expectations indicate that it will record 2.6% on an annual basis in May, lower than the April reading of 2.8%. Therefore, caution must be exercised, as any reading higher than expectations suggests a high possibility that the US dollar will strengthen against all major currencies. Conversely, it could negatively impact stocks, bonds, and commodities, specifically gold, given the inverse relationship between the dollar and other financial instruments.
What About Technical Analysis of the Dollar Index?
The dollar index is trading above the 50-day moving average at 105.17 points, and the 200-day moving average at 104.50 points. The biggest challenge is for the dollar index to break and exceed the stubborn resistance level at 106.13 points. Additionally, a golden crossover between the 20-day moving average at 105.18 and the 50-day moving average may support the dollar index in the next stage. The Relative Strength Index (RSI) indicates positive momentum for the dollar index, currently recording 61 points.
Please note that this analysis is provided for informational purposes only and should not be considered as investment advice.
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