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DXY: US Dollar Index Forecast Ahead of PCE Data

The US dollar index (DXY) retreated in the overnight session as worries of the Omicron variant faded. The index also declined after the relatively strong economic data from the United States. It is trading at $96, which was slightly below this week’s high of $96.61.

The DXY index reacted negatively to the latest consumer confidence data published by the Conference Board. The data showed that the country’s consumer confidence surprisingly rose to 115 in December even as inflation rose. This is an important number since it sends a signal about consumer spending.

The US also published strong third-quarter GDP and existing home sales numbers. Later today, the dollar index will react to the latest US personal consumer expenditure (PCE) data. This is important data since it is usually the one the Fed closely follows. Economists expect the data to show that the core PCE rose to 4.5%. This number will come a week after the Federal Reserve delivered a hawkish interest rate decision.

The dollar index will also react to the latest initial and continuing jobless claims data. Also, it will react to the latest durable goods order numbers. 

US dollar index forecast

The daily chart shows that the DXY index tilted lower in the overnight session after reports showed that Omicron had relatively mild symptoms. The index moved to the upper side of the ascending channel that is shown in blue. The MACD have also made a bearish crossover while the Relative Strength Index (RSI) has dropped. Notably, the dollar index has formed a double-top pattern.

Therefore, there is a likelihood that the dollar index will keep falling as bears target the middle line of the ascending channel at about $95.50. This view will be invalidated if the price moves above the key resistance at $96.50.