Economists at Westpac believe that the USD Index (DXY) could be poised to hit targets above 94.00, with 94.50 fingered as the potential upside target. This move, Westpac says, has become possible as a result of the break of the 93.00 level.
The bullishness of this outlook stems from the economic recovery that is pivoted on a strong vaccination drive, new stimulus payments, and the new infrastructure plan being put together by the Biden administration.
The economists note that the rebound hopes in the US “have risen sharply”, with payroll data, PMI and retail sales data expected to show “surprise on the strong side in coming weeks.”
Apart from the points noted by Westpac, the rising bond yields and the willingness of the Fed to stand aside and watch things evolve has also strengthened the positioning of the greenback in the market, resulting in a significant strengthening of the USD Index as it pares the losses of 2020.
Technical Levels to Watch
The evening star pattern on the daily chart, perched on the 93.173 resistance, indicates that the uptrend move has probably stalled. This could pave way for a mild correction, targeting 92.803 and possibly 92.50, with the 91.906 former neckline of the double bottom pattern also in the picture.
On the flip side, a break above the 93.173 area opens the door for bulls to push towards 93.805, with 94.620 lining up as a distant target to the north. This move may also materialize following the correction painted above, at which time prices may have become cheap enough for bullish re-entries.
Dollar index chart