James Hyerczyk
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US Dollar Index

The U.S. Dollar is surging against a basket of major currencies despite firmer Treasury yields. The strength in the index is being primary driven by a plunge in Euro.

The greenback is headed for its best week in nearly nine months on Friday on the back of a shift in the Federal Reserve’s monetary tone to hawkish. Worries that the Fed could start raising rates sooner than expected are also boosting the greenback. This notion was supported by hawkish comments from St. Louis Federal Reserve President Jim Bullard.

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At 20:39 GMT, September U.S. Dollar Index futures are trading 92.270, up 0.397 or +0.43%.

Bullard told CNBC’s “Squawk Box” it was natural for the Fed to tilt a little “hawkish” this week and that the first rates increase from the central bank would likely come in 2022.

Bullish dollar traders also feel with a dovish European Central Bank (ECB) seemingly far behind the Fed in the monetary policy cycle, the greenback is an attractive investment.

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart. A trade through Thursday’s high reaffirmed the uptrend. A trade through 89.795 will change the main trend to down.

The minor trend is also up. A trade through 90.310 will change the minor trend to down. This will shift momentum to the downside.

The nearest resistance is the Fibonacci level at 92.495.

On the downside, the nearest support is a pair of retracement levels at 91.950 to 91.850. This support cluster is currently controlling the near-term direction of the dollar index. The index is currently trading on the strong side of this support cluster, making it support.


Short-Term Outlook

Look for the bullish tone to continue as long as the index holds above 91.850. Taking out the Fibonacci level at 92.495 could trigger an acceleration to the upside with the next major target the March 31 main top at 93.430.

For a look at all of today’s economic events, check out our economic calendar.
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