I am selling the US dollar index (DXY) in September, and here’s why


The US dollar index (DXY) rose on Tuesday even after the relatively weak consumer confidence data from the United States. The index rose to $92.75, which was about 0.40% above the lowest level during the day. 

DXY August review

The US dollar index had a relatively mixed August. It initially rose to $93.74 after the strong non-farm payroll numbers that showed that the economy added more than 900k jobs in July. The index then retreated by more than 1.45%. 


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There were several key movers of the US dollar in August. First, the currency rose as the number of Covid cases rose in most countries. The most notable one was in New Zealand, a country that had evaded more cases in more than 6 months. The number of cases also rose in countries like Australia, China, and Canada. The US dollar, therefore rose, as investors rushed to its safety. 

The DXY index also reacted to mixed data from the US. The numbers showed that the headline consumer price index (CPI) remained unchanged at 5.4% in August. This was the highest level since 2008. At the same time, the core CPI that excludes the volatile food and energy products declined from 4.3% to 4.1%. This sent signs that inflation was starting to ease.

Meanwhile, additional data showed that the American housing market remained steady. Last week, data revealed that new and existing home sales rose sharply in July. 

The top mover of the US dollar index was the virtual Jackson Hole summit. In it, Fed Chair reiterated that the bank will likely start tapering its asset purchases later this year. Other key officials like Esther George and Raphael Bostic have supported the idea.

The key movers for the index in September will be the Covid situation, the US jobs and inflation data, and the FOMC statement scheduled for the final week of the month.

US dollar index forecast

US Dollar Index

The DXY index has been in a bearish trend lately. It has declined by more than 1.12% from its highest level in August. At the same time, it has moved to the 23.6% Fibonacci retracement level. It also seems like it is forming a head and shoulders pattern. It has already formed the left shoulder and the head. Soon, it will form the right shoulder. 

Therefore, there is a possibility that the index will break out lower in September. If this happens, the key level to watch will be the 50% retracement at $91.60.

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