Will the Dignity Return to US Dollar Index?

The US Dollar Index (DXY) was under pressure after Wednesday’s FOMC statement, while poor US GDP figures provided follow through to the downside on Friday. The sharp selloff erased the prior four weeks of gains of DXY but we have a lot of activity this week, and the trend could change easily.

After The dollar index rose above 97 last month for the first time since February 2016,  the index rebounded and fell almost 2 % since then. Currently the index is trading at now 95.63. The dollar index which measures the dollar against a basket of currencies ended down 1.3 percent, EUR rise 0.85% to close the week at $1.1172, JPY rise 2.78 percent to close the week at 102.3

Fed policy makers will gather again in Washington on June 14-15, and Fed’s Chairman Janet Yellen will discuss the decision in a press conference, therefore, big changes are not expected before that. Additionally, as I mention in my last post the dollar index, we need to wait and see what will happen at 95-96 area. Futures markets see the probability of an interest rate rise in December at 35.7 percent, according to CME Fed Watch.

From the technical side of the dollar index price: We can see support at 95+,  the level served as resistance throughout April and provided support in May, dollar index rate should keep above those level to confirm more upside, fall to downside could take it to the next support level of 92-93 ,dollar index rate also is expected to find its first resistance at 95.30-60, and a rise through could take it to the next resistance level of 96.20. For my opinion we probably see the dollar index trading at 95.60-96 area as a test, if not even lower levels such as 94.30.

COT data indicates a build of $3.55bn in net longs to $14.88bn held in the US dollar among non-commercials. The figure reflects a 31% increase in net longs on a week over week basis, and follows a 27% bump in the prior week. The US Dollar was the largest net long position held among currencies by a significant margin at the start of the prior week, but we can see something below the surfaces – decrease in short position while growing on the net position- this could tell us that bottom is near!