US Dollar Index With Large Buy Signal – A Thank You To The Fed Rate Hike!

US Dollar Index

With the analysis of the US dollar index, interested parties get a good indication of how the future of the US dollar looks to other currencies. If the US dollar index rises, other currencies become weak – and vice versa.

A very big influence on the external value of a currency is the interest rate level in the corresponding country. If investors can earn more interest on their money in one country than in another, they will take full advantage of this. This leads to currency shifts in favor of investments in high-interest currencies.

The Federal Reserve has raised the key interest rate by another 0.75%. With that in mind, it’s important to know where the journey should go in the long term. After all, a lot depends on the value of one’s own currency. For example, export prices for all kinds of goods rise when the euro falls.

The US dollar index was introduced in 1973 and can be traded as a future on the ICE (Intercontinental Exchange) futures exchange.

In the overview above you can see the current weightings. Currently, 57.6% of the index is made up of the euro, 13.6% of the Japanese yen and 11.9% is added by the British pound. 

The rest is made up of the Canadian dollar, the Swedish krona and the Swiss franc. The index is thus formed from a currency basket of the most important industrial currencies and therefore serves as a measure of the strength or weakness of the US dollar.

Last Analysis Price Target Was Strongly Exceeded

At the end of April, based on an upward breakout signal that had been given only a short time before, the further price gains to 103.82 were to be expected in the coming weeks. In this context, please take a look at the long-term chart from 2000.

Within a very short period of time, the area predicted was reached. Moreover, the US dollar index even clearly exceeded the high of 2017. Currently, a breakout attempt above this important resistance (horizontal red line) can be seen. The movement forms a new 20-year high. The the last time the U.S. dollar index stood as high as at the current time was in 2002.

W-Formation on US Dollar Index is Bullish

By the way, in the same chart I identified a W-formation in blue. The light red horizontal line is not only a resistance. But it also serves as a signal line of another buy signal. Since this is a weekly chart, this line must be crossed for several weeks to generate the corresponding buy signal.

As you can see, this crossing has already occurred. With the help of the mirroring technique, the long-term target at $121.29 could be created by applying the yellow square to the light red breakout line. In the daily chart, it could lead to an even stronger northward movement than before. Such a movement is called a “blow-off”.

The chart shows below the price trend additionally several indicators that also support such a presumption. All four are on buy – recognizable by the green arrows. Looking through the four indicators, it can be seen that none of them is in an area for a counter-signal. 

The previous high of 2022 was formed on June 15, not too long ago. Currently, the US dollar index only needs to rise just under 1.3 points for this mark to be exceeded.

US market participants are already factoring in an interest rate hike to over 3% in the course of the next twelve months on the US bond markets. This interest rate hike alone would ensure that more money flows into the USA and demand for the US dollar continues to rise. Conversely, the euro would accordingly slide to a new low against the US dollar.

Dr. Gregor Bauer
Dr. Gregor Bauer
Dr. Gregor Bauer credits his trading success to combining fundamental aspects of a trade with expert technical analysis. A Certified Financial Technician from the International Federation of Technical Analysts (IFTA), he’s rated as one of Germany’s top 300 economic experts.
Dr. Gregor Bauer
Dr. Gregor Bauer
Dr. Gregor Bauer credits his trading success to combining fundamental aspects of a trade with expert technical analysis. A Certified Financial Technician from the International Federation of Technical Analysts (IFTA), he’s rated as one of Germany’s top 300 economic experts.

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