In 2022, despite the global economic slowdown and rising global inflation, the U.S. dollar has been very strong; 12 days ago, the U.S. dollar index (DXY) rose to a high of 114.8, then index pulled back the puck, and a recent analysis by a Societe Generale economist noted that the index could rise again toward a high of 114.8.
The greenback index has begun to rise again after the recent pullback, and Societe Generale economists see “upside momentum prevailing.”
The dollar (aka greenback) has been a formidable opponent against a myriad of fiat currencies this year. Many currencies have suffered from the greenback’s strength, including the euro, the pound, the yen, the yuan, the Australian dollar, and the Canadian dollar.On September 27, theUS Dollar Index On September 27, the US Dollar Index (DXY)reached a high near 114.8, a high not recorded since 2001. The DXY is a leveraged index that measures the value of the dollar against six different fiat currencies.
The basket of fiat currencies that trade against the U.S. dollar consists of the EU euro, Swiss franc, Swedish krona, British pound, Canadian dollar, and Japanese yen. However, the basket of six currencies is not evenly distributed, with the euro accounting for 57.6% and the yen the second largest component at 13.6%. The index provides traders, analysts, and economists with a fair assessment of the dollar’s strength against a basket of foreign currencies.
The DXY was introduced in 1973 when U.S. President Richard Nixon removed the gold standard and dissolved the Bretton Woods Agreement. At that time, the DXY initially started with a base of 100, and since then the index has risen significantly, reaching an all-time high in February 1985; at that time in 1985, the DXY was at 160.41 and would need to rise more than 39% to break the record from its most recent high, set 12 days earlier.
Economists at France-based financial services firm Societe Generale S.A. (Sodgen) believe the DXY is headed back toward the 114.8 range after its recent decline. An economist at Societe Generale detailed on October 7 that “the possibility of a rebound toward the peaks near 113.60 and 114.80 cannot be ruled out.” The economist further stated that a break below the 110 region would signal a deeper pullback, while the DXY is currently trading near 112.747 at 11 pm ET on Sunday.
“There is risk of a deeper pullback only if the 110.00/109.30 support zone is broken. In such a scenario, the next target could be the September low at 107.60,” Societe Gener’s economistwrotein the company’s USD and market outlook note. The daily RSI is still within bullish territory, indicating that upside momentum prevails,” the economist added.
Currently, the five-day index has the euro down 2.39% against the US dollar, the Japanese yen down 1.02%, and the British pound down 3.19%. An ounce of gold is down 1.04%against the greenback this weekend, while silver is down roughly 2.47% but still above $20 per troy ounce of .999 pure silver. The global crypto market capitalization of all existing cryptocurrencies has risen 0.08% over the past 24 hours and the crypto economy is now valued at $944.6 billion.
The stock market ended in the red on Friday afternoon, with the NASDAQ down 3.8%, the Dow Jones Composite down 2.05%, the NYSE down 3.34%, and the S&The P500 was down 2.8%. More than a trillion nominal U.S. dollars were erased from the U.S. stock market on Friday, or a U.S. dollar value greater than the size of the entire crypto economy today.
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