DXY - The American Strength!

TVC:DXY   U.S. Dollar Currency Index
The strengthening of the U.S Dollar has taken the spotlight lately since the Coronavirus crisis broke out, the Federal Reserve acted quickly to shored up Dollar hegemony on the global economy and taking this point of view I want to analyze closer the DXY prospect. This study aims to elaborate cartography for the Forex Market so we can better understand what is behind its movements.

Looking at the monthly chart to take a long term view we can see a possible development of a new bullish movement, that it starts with the formation of a Bullish pivot . Which has as confirmation zone the level of 61.8% of Fibonacci Retracement of the last Bearish wave (101.80 - 103.82), and as a Target an old top from the Dot-com bubble that formed a resistance zone (119.22 - 121.02). The support zone (89.62 -88.25) below the price could be set as a stop-loss area since it would cancel the pivot play, and would pressure a breakout of the SMA 200, and a new bearish impulse.

However, the current U.S economy landscape helps us to believe that the most likely movement for the DXY now is a bullish one, because even with the monstrous number of 38.6 million Americans out of the job the stock market and the dollar itself didn't show proportional weakness. The strength behind this scenario lies in the Federal Reserve and U.S Treasury intervention, flooding the market with free cash, opening swap lines and issuing debt at a fast pace to avoid a stumble of the markets, and providing liquidity for the rising demand for U.S Dollars.

The DXY has as propelling, the issuing of new bonds by the U.S Treasury, the auction of the 20-year Treasury had a massive demand and the Treasury Secretary Steven Mnuchin has already expressed the will of issuing more of the 10-year Treasury; 20-year Treasury; 30-year Treasury, and even ultra-long term ones like 50-year Treasury 100-year Treasury, a movement that aims to match the trillions of dollars in debt that the government is issuing to fight the crisis.

Also, the U.S exports seem set to have a boost from the Trade deal with China, that already agreed to elevate the purchase of U.S goods for at least $200 billion, an inflow that could warm up the U.S market and propel new deals that might increase the U.S exports even further. A context that might open the gates for a huge flow of demand for U.S Dollars, and push the DXY for even higher levels, like the chart has giving signals of it.

Please feel free to share your comments and perspectives below, I'm still grinding my way to improve my analysis, so all feedback is welcome.

“The harder the conflict, the greater the triumph.”
― George Washington

Happy Memorial Day!


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