$DXY Recovers from One-Year Low, Indicates Lower Volatility in Near Term

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The US Dollar Index ($DXY) is showing signs of recovery after dropping to a One-Year Low in March of 2023. According to reports, the dollar index is currently at 101.552, after an initial drop due to lower-than-expected retail sales. Despite the drop, the dollar index is now less volatile than usual, with Bollinger Bands 24.82% narrower than normal. However, experts suggest that the possibility of a sharper move in the near term has increased.

Jefferies money market economist Thomas Simons noted that personal consumption flattened out in February and March, but this followed a huge jump in spending momentum in January. Despite the weakness in February and March, the quarterly averages are much stronger due to the spending spree in January.

Meanwhile, senior foreign exchange strategist at TD Securities in New York, Mazen Issa, suggests that the market was looking for something much weaker than the retail sales control group. He noted that the overarching theme is that the US economy is getting a slowdown, and it may take longer for things to unfold. However, he believes that the US economy is more resilient than people have given it credit for.

Technical indicators show that the US Dollar Index is currently 4.6% below its 200-period moving average and is in a downward trend. However, volatility is lower than average over the last 10 periods, and trend forecasting oscillators are currently bearish on $DXY. The Stochastic Oscillator is at an oversold reading, but a signal is not generated until the oscillator crosses above 20. The current value of the RSI is not a topping or bottoming area, and the current value of the CCI is also an oversold reading.

Overall, the recovery of the US Dollar Index from a One-Year Low is a positive sign for the US economy. While the economy may be experiencing a slowdown, experts suggest that it is more resilient than people have given it credit for. Technical indicators suggest that the dollar index is in a downward trend, but the low volatility indicates that there may not be a sharp move in the near term.

Technical Outlook

Short Term: Oversold

Intermediate Term: Bearish

Long Term: Bearish

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