Here is the recovery of the US dollar. Grandmother?

After eight months of misery, the US dollar index – and the US dollar it represents – is recovering. The improvement is affecting various parts of the market, including inventories, especially raw materials. Therefore, the professional should take this into account. But first. The chart below says it all. It also requires some explanation. The wild surge seen in February and March last year is largely due to the uncertainty associated with the coronavirus outbreak. The world was relatively convinced that central banks would do something to combat the harmful effects of contagion. People did not know what these banks would do or whether it would be enough. By April, when the incentive efforts started in earnest, clarity emerged. Cheap currency printing significantly reduced the value of the dollar compared to May last year, and the US dollar index remained low last year. Things are changing now. In fact, things have changed dramatically since Thursday with the US dollar index, thanks to crossing above the 200-day moving average (green) line at 92.6. This index has crossed the long-term indicator line for the first time since May. However, this is not just the movement above the 200-day moving average line. Also on Thursday, the 50-day moving average line (red) crossed the 100-day moving average line (gray) for the first time since June last year; The 20-day moving average line (blue) has risen above the 100-day moving average line for the first time since June last year. These are all changes that mark a major shift towards the dollar. This does not mean that the US dollar index can only rise from here. You will almost certainly feel at least a temporary setback. Things are clearly different now than they were a few weeks ago. As for how the renewed strength of the dollar might affect different parts of the market, we're already there. Read more

Join the Discussion

  • BrokerEUR/USD
    ETX Capital 0.6pips (variable) margin: 3.33%
    LCG 0.3pips (variable) margin: 3.33%
  • Back to top