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US Dollar Index Analysis – October-8-2023

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Bloomberg – The US Dollar Index has been going up since the third quarter of this year. It’s now back to the same value it had around December last year. This is because the Federal Reserve (the central bank of the US) has been increasing interest rates.

In their meeting in September, the Federal Reserve decided not to change the interest rates. But they said that they might increase them again if they think it’s necessary for the economy. The head of the Federal Reserve, Chair Powell, said that they will be very careful when deciding if they need to increase interest rates more. He said the same thing at a recent big meeting called the Jackson Hole Symposium. This means that they might not change the rates for the rest of the year if they think it’s not needed.

The value of the US Dollar Index has been going up a lot since July. It has increased by more than 6% from its lowest point of 99.49. The value of the US dollar compared to other currencies (called the US dollar index) has been helped by a weak Euro and a weak Japanese Yen. The Euro makes up about 58% of this index, and the Yen makes up about 13.5%.

The Bank of Japan said that by the end of this year, they might start to reduce their very loose monetary policy (which means they have been trying to increase spending and investment by making borrowing cheaper). This would make the Yen more valuable. The European Central Bank might also increase their interest rates once more this year. This might not make the Euro much more valuable, but if it stays around its current value for a few months, it could stop the US dollar from increasing much more.

It’s always risky to try and guess what central banks will do in the future. But recently, some bankers from G7 countries (seven of the world’s largest economies) have been suggesting that interest rates around the world are close to their highest point.

US Dollar Index Analysis - October-8-2023

US Dollar Index Technical Analysis

US Dollar Index Technical Analysis

If you look at a daily chart of the US dollar index, it looks like it could keep increasing. But there might be a limit to how much it can increase. There is a resistance level (a point where it becomes harder for an asset to increase in value) around 106.84, which was a high point in November 2022. It’s likely that this level will hold under current market conditions. It’s hard to sell something when its value is increasing, even if you think it will start to decrease soon. But if it increases to 106.84, this could be a good chance to sell your US dollars in the next few months.

  • 8 October 2023
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