Price AnalysisTrading Signals

US Dollar Index: Cup & Handle Suggests Further Gains

  • The United States dollar index has printed a cup & hand setup on the four-hour chart.
  • Housing data and US PMIs indicate a slowing economy.
  • Fed official has emphasized that the central bank will keep rising rates.

The United States dollar index price printed a cup & handle setup amid persistent concerns about the economy and the Fed Reserve moves. While publishing this content, DXY traded at $108.63, slightly beneath $109.30 – this month’s high. Meantime, the price hovers nearly 3.8% beyond this month’s lowest mark.

Hawkish Federal Sentiment

The DXY index maintained massive bullish trends over the last few weeks. The upsurge amplified after the Fed announced its previous financial policy meeting minutes. Meanwhile, they indicated that the panel was still worried about the surging inflation.

Precisely, they’re concerned about inflation entrenched within the economy. Also, members are worried they could have hiked retest quicker, which might trigger a hard landing. Last month’s conference occurred before the BLS (Bureau of Labor Statistics) announced the recent inflation and jobs data.

The numbers showed a tightening labor market, with the economy adding more than 528K employments in July, whereas the unemployment rate declined to 3.5%. Meantime, the declining gas charges have triggered somewhat lower inflation. The CPI (consumer price index) plunged to July’s 8.7% from June’s 9.1%.

Furthermore, Federal officials have emphasized that higher rates remain logical until sustained inflation declines. For instance, Neel Kashkari reiterated that the Federal Reserve would continue increasing rates in the upcoming weeks.

Moreover, the USD index surged as more data warns about the weakening American economy. For instance, the services PMI slumped to 44 – the lowest mark since 2020. Also, the composite PMI kept retreating.

Moreover, other stats showed that new, existing, and pending home sales plummeted drastically in July. Building permits & housing starts also declined over the month.

USD Index Prediction

According to the 4hr charts, DXY Index has maintained a massive recovery pace over the last few days. That saw it moving beyond the 25 and 50 moving averages. Also, the index created a cup & handle formation.

The RSI (Relative Strength Index) fluctuated from the 57 overbought regions. Thus, DXY might keep surging as bulls aim the resistance at $110. A move beneath $108.21 support will cancel the bullish outlook.

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