US Dollar Index News: DXY Shines Amid Rate Speculations; Powell’s Speech Holds Key

Highlights

• The U.S. dollar displays resilience, awaiting Powell’s speech at Jackson Hole Economic Policy Symposium.
• Persistent inflation and robust U.S. economy may result in sustained elevated interest rates.
• August sees a 2% surge in the dollar index, overcoming a two-month downturn, to reach 104.11.
• The U.S. dollar’s strength reinforced as euro and sterling mark two-month lows, yen nears intervention.

Overview

The U.S. dollar is standing flat, but resilient on Friday, maintaining its momentum against a basket of primary currencies, as the financial world eagerly anticipates Federal Reserve Chair Jerome Powell’s crucial address at the Jackson Hole Economic Policy Symposium at 14:05 GMT.

Dollar Index & Market Anticipation

Climbing 0.019% to reach 104.11, its highest level since June 7, the dollar index is showcasing an impressive 2% surge this August, after breaking its two-month downturn. Investors are poised to discern from Powell’s speech the Federal Reserve’s future stance on interest rates and the expected duration of the heightened rates.

U.S. Treasury Yields & Monetary Policy

As U.S. Treasury yields experienced a slight hike with the 10-year note reaching 4.247% and the 30-year bond inching up to 4.309%, the market’s attention is anchored on Powell. His remarks could shed light on the U.S. monetary trajectory, especially in the wake of 10-year yields soaring to a pinnacle not witnessed since November 2007. This surge is attributed to the unexpectedly robust U.S. economy and potential persistent inflation, nudging the central bank towards a prolonged phase of heightened rates.

Federal Reserve’s Position & Economic Indicators

Recent indicators, such as the dip in new unemployment claims, paint a robust economic canvas, assuaging recession concerns. However, with inflation surpassing the Federal Reserve’s benchmark, it’s anticipated that the central bank might sustain elevated interest rates. This sentiment is bolstered by insights from Philadelphia Fed President Patrick Harker and Boston Fed President Susan Collins, who, in recent interviews, suggested a potential halt in interest rate hikes.

Short-Term Forecast

Given the existing economic indicators and market pulse, the current market sentiment leans bullish for the U.S. dollar. As market speculations about interest rate cuts in May next year gain traction, the overarching question remains: for how long will the Federal Reserve sustain the current interest rates? The global currency dynamics, with the euro and sterling hitting two-month lows and the yen approaching intervention levels, further underscore the dollar’s prevailing strength.

Technical Analysis

The US Dollar Index, currently priced at 104.031, has witnessed a slight increase from the previous 4-hour close at 104.024. When analyzing its position relative to the 200-4H moving average of 101.998, the index sits comfortably above, signaling a bullish tendency. Furthermore, it also resides above the 50-4H moving average of 103.466, reinforcing this bullish sentiment. The 14-4H RSI stands at 61.35, suggesting a stronger momentum but not yet reaching the overbought territory.

Although the index is trading near the main resistance zone (104.299 to 104.403), it remains well-supported above the main support area (103.273 to 103.013). Given these indicators, the market sentiment for the US Dollar Index appears bullish.