The US Dollar Index (DXY), an index of the value of the US Dollar (USD) measured against a basket of six world currencies, currently trades near 101.50 during the early European trading hours on Wednesday. The DXY extends the rally as traders raise their bets on the US interest rate hikes this year.
Markets are pricing in a 36.3% chance of a 25-basis-point hike at the July meeting, up from 8.5% a week ago, and 70.3% for September, up from 29.1%, according to the CME FedWatch tool.
"The dollar's strength right now, at the end of the day, it's still hawkishness, if you look at Fed expectations with Fed funds futures right now, they are some of the highest odds that we've seen in a while," said Eugene Epstein, head of trading and structured products at Moneycorp in Stamford, Connecticut.
Technical Analysis:
In the daily chart, Dollar Index Spot extends its advance well above the Bollinger Bands’ (20) simple moving average and the 100-day moving average, keeping the near-term bias firmly bullish as price rides the upper band. The Relative Strength Index (14) holds in overbought territory near 74, which suggests strong upside momentum but also hints that the latest leg higher is becoming stretched.
On the downside, the upper Bollinger Band at about 101.48 has turned into immediate dynamic support, ahead of the Bollinger mid-line / 20-day simple moving average at 100.00. Below there, the 100-day moving average at 98.95 and the lower Bollinger Band around 98.52 form a deeper support area that would be expected to cushion a more pronounced correction if profit-taking accelerates.
On the upside, the immediate resistance level is located in the 101.95-102.00 zone, representing the May 12 high, 2025 and the psychological level. The next hurdle to watch is the April 7 high, 2025 at 103.54.
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