US Dollar Index bouncing yet again

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The US Dollar Index has had a bit of strength over the past week, which of course is not much of a surprise. The DXY has carved out a few obvious support and demand areas, and it now looks as if we are going to reach towards the next resistance area above at the 97.50 level. Because of this, I am looking to get long of the USD against most majors. The biggest moves could be felt in the Asia/Pacific region, with an eye on the New Zealand and Australian dollars. This ties in nicely with the overall ‘risk off’ attitude of the world currently.

The current nonsense going on at the Ukraine/Russian border is going to cause a certain amount of fear, and we started to see a lot of that shown late on Friday as Sec. Blinken in the US stated that an invasion of Ukraine by the Russians was ‘very likely.’ Having said that, we then closed for the weekend after significant moves in almost all markets. Everything screamed ‘freak out’ by the time the Americans closed shop.

All of that being said, I think there is a good chance that we will get ‘good news’ out of the Ukrainian situation. The US and Russia have had talks on Saturday, and this is an opportunity for cooler heads to prevail. If this does in fact turn out to be fruitful, it is likely that we will see a ‘risk on move’ in general. This could send the USD lower initially, but there are a lot of other concerns, like inflation and tightening by the Federal Reserve that comes into play eventually. The market should, at the very least, reach the top of the trading range we are in.

Weekly chart of the US Dollar Index
US Dollar Index Weekly Chart

If we see a run to reach above 97.50, I believe that the USD will really start to fly. This probably won’t happen this week, but I think at the very least we will try to test it.

Chris

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