Market Overview

The U.S. Dollar has been vulnerable to investors’ mood swings over the last few days. The U.S. Dollar index (DXY) was breaking the limits in the beginning of the week, but lost ground at 96.7 points as omicron-variant risks appeared to be milder than previously expected.

The DXY index fell to 96 points on Thursday despite positive developments in the U.S. economy that grew by 2.3% year-on-year in Q3 2021 vs the expected 2.1%. Consumer confidence in December rose to 115.8 points vs the expected 110.8 points and the previous 111.9 points. But the most positive push came from South Africa that reported the risk of hospitalisation for patients with the Omicron variant of COVID-19 and Omicron variant cases are less sever and therefore are less likely to lead to death comparing to the Delta variant. This information seemed to increase investors’ risk appetite immediately and lowered the demand for safe haven assets like the Greenback.

However, investors are still mindful of the Federal Reserve’s (Fed) tapering of the bond buying program  that should be increased dramatically in the coming months. This is keeping the Greenback in the narrow range above 95.8 points by the DXY index. Christmas and the New Year celebrations are also not the best time for strong movements in the FX markets. No important data is expected before the end of the year. Most likely the index may remain within the 95.9-96.7 range by the end of the year.

This may also be confirmed by EURUSD trades that are also trapped between 1.12-1.14.

Waning COVID-19 fears may put the monetary actions of major central banks at the top of investors’ list of things to look out for. With this in mind, investors may look at possible interest rates hikes that may support the Dollar. So, the DXY index may target 97 points as its first upside target.

Disclaimer:

Analysis and opinions provided herein are intended solely for informational and educational purposes and don't represent a recommendation or investment advice by TeleTrade.