On Friday, May 20, DXY was down by 0.02% during the European session. The index is trading at 102.77 at the time of writing.
- DXY is looking to regain the 103 level after dropping 0.93% on Thursday.
- DXY consolidates the biggest daily fall in 10 weeks amid fresh hopes of faster rate hikes.
- The broader market sentiment will provide a fresh impetus amid a lack of data.
DXY fundamental forecast
The DXY registered its largest one-day drop since early March, losing 0.93% on Thursday. On Friday, the index is trying to recoup its early losses.
A sigh of relief
After Thursday’s sharp drop to 2-week lows in the 103.00 range, today’s index seeks to reclaim some ground lost amid a mixed tone in US cash markets and a lack of clarity in broad risk appetite.
The hawkish Fed
Fed officials have remained hawkish, and there has been a flurry of speakers this week, including Fed chairman Powell, whose comments in an interview with the Wall Street Journal were the most aggressive yet. He believes the Fed will have to restrict growth to return inflation to 2%.
US Treasury dropping
US bond rates dropped following the market sell-off yesterday, and the yield curve bull steepened as investors continued to flock to safe assets. The yield on a 2-year government bond went from 2.68% to 2.58%, while the yield on a 10-year government bond fell from 2.90% to 2.77%.
What’s up with forex majors?
The dollar’s slight decline has boosted the majors a bit. The EUR/USD took advantage of the greenback’s selling pressure and soared to its highest level in two weeks, over 1.0600.
Following a lackluster showing on Wednesday, the GBP/USD pair continued its weekly bounce. As of this writing, the pair made minor daily gains and traded close to 1.2500.
The USD/JPY pair remains below 128.00 in the European session after falling throughout the Asian trading session.
Key data releases from the US
Today, we don’t have anything on the US docket.
Following a multi-session decline on Thursday, the dollar attempts a minor comeback to the 103.00 area. Today, the lack of data releases on the US schedule should focus all attention on the evolution of broad risk appetite patterns.
Investors are concerned about the likelihood of a “hard landing” of the US economy in the face of rising inflation and the Fed’s more aggressive tightening of monetary conditions.
DXY technical analysis: looking to regain 103 level
During the European session, DXY is looking to regain the 103 level. So far, the index has lost 0.02%. The index is now trading at 102.77. The index is above its 100-day MA on the daily chart, and the RSI is close to neutrality.
A break above 103.96 would open the door to 104.23. If it can cross that level, we’ll see the index touching 105.00. On the flip side, the next support for the index lies around 102.22. If the index slips below this level, we can see a downward movement towards the 101.51 level.