US DOLLAR OUTLOOK: DXY INDEX PROBES KEY RESISTANCE AS VIX ‘FEAR-GAUGE’ SPIKES LOWER US Greenback bulls have flexed their muscle t
US DOLLAR OUTLOOK: DXY INDEX PROBES KEY RESISTANCE AS VIX ‘FEAR-GAUGE’ SPIKES LOWER
US Greenback bulls have flexed their muscle tissues over the previous few weeks. Sustained US Greenback energy because the early January swing low leaves the broader DXY Index up 1.6% year-to-date and at its highest degree in eight-weeks. The US Greenback rebound seems fueled by quite a lot of catalysts – together with rising Treasury yields, diverging financial development trajectories, and resurfacing threat aversion.
EUR/USD value motion, for instance, has plunged over 300-pips from final month’s peak. On the identical time, now we have seen the yield on 10-year Treasuries prime 1.1% and US PMI knowledge shine shiny relative to the Eurozone. To not point out, in mild of its posturing as a safe-haven forex, it’s unsurprising that the US Greenback has appreciated in opposition to its friends with the S&P 500-derived VIX Index surging to its highest degree since November. This typically sturdy direct relationship between the VIX ‘fear-gauge’ and broader US Greenback is highlighted within the chart under.
DXY – US DOLLAR INDEX PRICE CHART WITH VIX OVERLAID: DAILY TIME FRAME (MAR 2020 TO FEB 2021)
Chart by @RichDvorakFX created utilizing TradingView
That mentioned, the US Greenback would possibly face headwinds going ahead as market sentiment recovers from the current rout and sends the VIX Index sharply decrease. Additional, the path of EUR/USD has potential to strongarm the broader US Greenback. That is contemplating EUR/USD value motion is the biggest part of the DXY Index with a 57.6% weighting. As such, the US Greenback may wrestle to increase its advance if EUR/USD can defend the 1.2000-level, a psychologically-significant space of prior resistance-turned-support.
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USD PRICE OUTLOOK – US DOLLAR IMPLIED VOLATILITY TRADING RANGES (OVERNIGHT)
Shifting focus to US Greenback implied volatility readings, we see that GBP/USD value motion is anticipated to be essentially the most energetic main forex pair throughout Thursday’s buying and selling session. That is judging by GBP/USD in a single day implied volatility of 12.0%, which is above its 20-day common of seven.9% and ranks within the 82nd percentile of measurements taken during the last 12-months. Potential for Pound-Greenback volatility probably surrounds high-impact occasion threat stemming from the Financial institution of England rate of interest choice due for launch 04 February at 12:00 GMT.
Preserve Studying – US Greenback Technical Forecast: DXY, EUR/USD, GBP/USD, AUD/USD
— Written by Wealthy Dvorak, Analyst for DailyFX.com
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