DXY closes trading week strong Despite paring some gains

The US Dollar Index (DXY) experienced a slight pullback on Friday, November 22nd, after reaching a two-year high amidst ongoing geopolitical tensions. While the robust S&P PMI data underscored the resilience of the US economy, supporting the DXY’s upward trajectory, several factors contributed to its decline.

Firstly, profit-taking emerged as a significant influence, as investors capitalized on the recent rally. Secondly, positive economic developments in China, including a rate reduction and a comprehensive stimulus package, diverted some attention away from the US Dollar. These factors combined to push the DXY below the 108.00 level, stabilizing around 107.50.

Despite the recent retreat, the DXY maintains a bullish bias, driven by several key factors. Strong economic data from the US continues to bolster the dollar, and the Federal Reserve’s less dovish stance supports higher interest rates. While investors anticipate a more gradual pace of rate cuts, the overall uptrend remains intact. Technical indicators suggest potential consolidation in the near term, but the underlying bullish momentum remains strong.

Key Market Movers:

• US Dollar Index: Dipped after reaching a two-year high due to profit-taking and positive economic news from China.

• S&P PMI Data: The US S&P Global Composite PMI rose to 55.3 in November, indicating a strong expansion in both manufacturing and services sectors.

• Federal Reserve: Fed officials remain cautious about inflation risks, suggesting potential pause on rate cuts as necessary in the future.

Technical Outlook:

The DXY’s recent surge to 108.00 has led to overbought conditions, as indicated by technical indicators like the Relative Strength Index (RSI) and Moving Average Convergence Divergence (MACD). This suggests a potential short-term correction or consolidation phase. However, the strong economic fundamentals and hawkish Fed stance provide robust support for the DXY, maintaining its overall bullish trend.

In the short term, the DXY is likely to face resistance around the 108.00 level. Support levels can be found at 106.00-105.00. Profit-taking and risk-off sentiment could further contribute to a pullback or consolidation in the coming days.