Market news

17 December 2021

US Dollar Index breaks above the ascending triangle accelerate towards 98.00

  • The US Dollar Index ended the week above the 96.50 threshold.
  • The US 10-year Treasury yield finished down, at 1.412%.
  • DXY Technical outlook: Breaks above the ascending triangle, USD bulls target  98.00.

The US Dollar Index, also known as DXY, which measures the greenback’s performance against a basket of six rivals, rallies 0.72%, sitting at 96.68 during the day as the New York session wanes at the time of writing. The market sentiment was downbeat as the Wall Street session closed, with major US equities finishing in the red, following European stock indices footsteps.

In the US bond market, Treasury yields in the short-maturity of the curve rise with 2s, and 5s, up between 1 and 2.5 basis points, ended at 0.6457% and 1.1815%, each. In the mid to long maturity of the yield curve, yields fell between 1-4 basis points, with 10s, the 20s, and 30s, finishing at 1.412%, 1,8623%, and 1.82%, respectively.

In the week, the main event for the US dollar was the Federal Reserve monetary policy decision. The US central bank kept their interest rates unchanged at the 0 to 0.25% range while increasing the speed of the bond taper, from the $15 Billion agreed initially up to $30 Billion, beginning in mid-January of 2022. 

Additionally, it released its Summary of Economic Projections, also known as SEP. Inside of that report lies the “famous” dot-plot, which displays the 18 Federal Reserve Board members’ projections for the Federal Fund Rates (FFR) in the current year, and subsequent ones. In this report, the US central bank policymakers expect three rate hikes by the end of 2022, projecting the FFR at 0.90%.

The market initially reacted as if the event was a “buy the rumor sell the fact.” Nevertheless, Friday’s price action is more aligned to the hawkish switch by the Fed. 

US Dollar Index (DXY) Price Forecast: Technical outlook

The US Dollar Index finished the week above the 96.00 figure for the third week in a row. The DXY is in a clear uptrend, and through the last couple of weeks, price action consolidated around the 95.50-96.50 range, forming an ascending triangle in an uptrend.

On Wednesday, the DXY broke the top-trendline, reaching a daily high at 96.91, falling inside the ascending triangle after the Fed monetary policy decision. Nevertheless, the downward move was not strong enough to overcome the bottom-trendline that forms the ascending triangle.

At press time, the DXY broke for the second time above the downslope top-trendline of the ascending triangle, leaving as the first resistance the 97.00 figure. A breach of the latter would expose the June 30 high at 97.80, followed by the ascending triangle target at 98.00.

 

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