The US dollar index (DXY) jumped to the highest level since November 202020 as investors remained focused about the rising Covid cases and the hawkish Federal Reserve decision. The index is trading at $93.58, which is about 4.85% above the lowest level this year.
Why the USD index jumped
The US dollar jumped against key currencies, including the euro, sterling, Japanese yen, and Swiss franc because of the relatively hawkish Federal Reserve. Recent statements by key Fed officials like Raphael Bostic, Richard Clarida, and Eric Rosengreen have signaled that the Fed should start winding down the quantitative easing process.
This view was supported by the FOMC minutes, which showed that more members were in agreement that the Federal Reserve should start to winding down the asset purchases.
The US dollar index has also risen as worries of the new wave of the pandemic rises. Recently, the number of Covid cases has jumped in most cases. Some of the countries where this trend is rising is in New Zealand, Australia, and the US. Indeed, this week, New Zealand decided to go back to lockdown after it detected one case. Since then, the country has confirmed more Covid cases. Therefore, with the cases rising, investors tend to move to the safety of the US dollar index.
So, what next for the DXY index?
US dollar index forecast
The daily chart shows that the US dollar index has been in a strong upward trend recently. The index managed to move above the key resistance level at $93.43, which was the highest level in March. It has also moved above the 25-day and 50-day moving averages. The momentum indicator has also been rising.
Therefore, the index will likely maintain the bullish trend as bulls target the next key resistance at $94.73, which was the highest level on September 28. On the flip side, a drop below the support at $92 will invalidate the bullish view.