DXY Price Analysis: Finds Rejection at 94.00 Ahead of US Data

• DXY marked a 5-day high yesterday but could not find acceptance around 94.00 and fell sharply.
• Yesterday’s gains were attributed to the weaker Euro against the USD, hawkish stance of FOMC, and rise in demand for crude oil.
• ECB-speak and US consumer confidence figures are the key events ahead today.

The DXY price analysis suggests no clear direction at the moment as the price slipped from the key 94.00 mark today but found some ground near the 93.70 area.

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DXY fundamental analysis:

Yesterday, the DXY rose to a new 5-day high, mostly against the Euro, while the dollar rose only moderately against the other components of the DXY. Furthermore, US Treasury Secretary Janet Yellen and Chinese Deputy Prime Minister Liu He discussed the macroeconomic situation and cooperation between the two countries, limiting the dollar’s growth in pairs other than EUR/USD.

Following the Wall Street Journal’s (WSJ) report on the November Federal Reserve meeting, the US dollar index (DXY) rebounded.

At that meeting, Fed chairman Jerome Powell reduced asset purchases, according to the document. As a result, we expect the central bank to begin slowing its purchase of these assets by about $15 billion per month. This should be completed by June next year.

The FOMC can also increase interest rates while reducing purchases of these assets. The Fed indicated in its last interest rate decision that it would start raising interest rates from 2024.

As crude oil prices rose, so did the dollar index. Brent crude climbed to a multi-year high of $86 while WTI crude reached over $84. Natural gas prices continued to rise as well.

In response to Goldman Sachs saying demand had already surpassed pre-Covid-19 levels, crude oil prices surged. Due to this rally, investors expect higher inflation in the US and around the world.

Biden’s plan to reach consensus by the end of the week garnered close support among Senate Democrats on Monday, but some members of the House have voiced concerns about certain terms of the agreement in the coming days. In addition, US consumer confidence data is expected to be released today.

DXY will take a position on the latest consumer confidence data from the Conference Board on the data horizon. In October, confidence should have fallen slightly as people continued to fret about inflation.

The markets will also closely follow François Villerois de Gallo’s speech. Another group argues that price increases are temporary and don’t require such radical reforms.

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DXY price technical analysis: 20-SMA to support

The DXY price saw a stiff hurdle around the 100-period SMA on the 4-hour chart and fell sharply towards the 93.70 area (20-period SMA), where it found some respite. However, any further dip may see support at 93.63 (200-period SMA) ahead of the key horizontal level at 93.50.

On the upside, 94.00 is the key psychological level that coincides with the 100-period SMA, which may also limit the rallies. However, breaching the level maybe 94.20 (horizontal level) in focus.