Coach explained the narrative that the time window for risk-off is tied to a DXY low of around.9950.
Note: All information on this page is subject to change. The use of this website constitutes acceptance of our user agreement. Please read our privacy policy and legal disclaimer.
Opinions expressed at FXstreet.com are those of the individual authors and do not necessarily represent the opinion of FXstreet.com or its management.
Risk Disclosure: Trading foreign exchange on margin carries a high level of risk, and may not be suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to invest in foreign exchange you should carefully consider your investment objectives, level of experience, and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with foreign exchange trading, and seek advice from an independent financial advisor if you have any doubts.
Read More
The greenback (DXY) is seen completing its first wave, with the index currently trading around the .9950 level. After an initial surge higher in response to easing of pandemic-led restrictions, the index is now advancing in a steep rally and has been posting multiple intraday record highs.
The strength of the DXY has been driven by a broad weakening of other major world currencies and the increasing optimism in the US economy. The US has been the most successful in containing the Covid-19 pandemic and this has led to a faster recovery than the rest of the world. The easing of restrictions and resumption of business activity has resulted in a surge of consumer confidence and a rise in US economic growth prospects.
The US Dollar Index is a measure of the US Dollar strength against a basket of major world currencies, which also includes the euro, British Pound, Japanese Yen and Canadian Dollar. It serves as a barometer of the US economic health and is keenly watched by currency traders and investors.
This month, the DXY has rallied to its highest level in more than two years and has broken through the previous all-time high of 100.99 on the 14th of May. The US Dollar index is now trading near its all-time peak, suggesting that a further advance could be upon us, with a break of the 1.0050 level likely to attract further gains.
The appeal of the greenback is also underpinned by rising US Treasury yields and the continuation of the reflationary environment. With investors seeking better returns, the US dollar will remain attractive, especially as the Federal Reserve continues to maintain its posture of containment.
Overall, it appears that the DXY is set to complete its first wave higher, with the index currently trading around the .9950 level. Whether the surge continues to push further highs or reverses, remains to be seen. Short-term traders should keep a close eye on the US Dollar Index and gauge its progress in order to capitalize on any potential market developments.
