Dollar Index Strengthens Over 98.595, Weakens Under 98.200

The U.S. Dollar trading nearly flat against a basket of major currencies late in the session on Friday after recovering from an early session setback. The greenback’s rebound is likely being fueled by a sharp rise in U.S. Treasury yields.

The 10-year U.S. Treasury yield hit a fresh two-year high Friday as investors anticipate a more aggressive Fed. The 10-year rate at its highs of Friday’s session hit 2.503%, its highest level since May 2019. The yield started the week near 2.15%

At 17:21 GMT, June U.S. Dollar Index futures are trading 98.820, up 0.020 or +0.02%. The Invesco DB US Dollar Index Bullish Fund ETF (UUP) is at $26.41, up $0.01 or +0.04%.

Soaring rates come amid growing expectations the Federal Reserve will be more aggressive in its tightening cycle.

Fed Chair Jerome Powell on Monday said, “inflation is much too high,” and emphasized the Fed would continue to raise interest rates until inflation is under control.

“If we conclude that it is appropriate to move more aggressively by raising the federal funds rate by more than 25 basis points at a meeting or meetings, we will do so,” Powell said in a speech to the National Association for Business Economics.

Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart. A trade through 99.300 will change the main trend to up. A move through 99.470 will reaffirm the change in trend. A trade through 97.715 will signal a resumption of the downtrend.

The minor range is 99.470 to 97.715. The index is currently trading on the strong side of its pivot at 98.595, making it support.

The major support is the long-term Fibonacci level at 98.200.

Short-Term Outlook

Holding above the pivot at 98.200 will indicate the presence of buyers. If this move creates enough upside momentum then look for a trade through the minor top at 98.965. This could lead to a test of the two main tops at 99.300 and 99.470.

The main top is the key level to overcome. The chart pattern suggests 99.470 is the potential trigger point for an acceleration to the upside with a resistance cluster at 100.560 – 100.930 the next major target.

On the downside, the long-term Fibonacci level at 98.200 has to hold to sustain the current momentum. If it fails, the index could revisit 97.250 – 96.750.