U.S. Dollar is in a rocket ship set for orbit
The dollar remains on an impressive bull run, continuing to defy many big institutional players that are refusing to believe it is the start of the 2021 trend. However, I largely beg to differ given the momentum behind the greenback at present to the upside.
Looking left of the chart, there isn’t anything to suggest slowdown anytime soon via the higher time frames. The US Dollar Index (DXY) has climbed up to the highest levels seen since November 2020, reversing the downside pressure that was observed heading into and on the back of the U.S. 2020 Presidential elections.
Before we take a deeper look technically, let’s go over the fundamental drivers supporting the dollar right now:
U.S. fiscal stimulus
The U.S. President Biden’s incoming rollout of the huge $1.9 trillion stimulus program, putting cash in millions of Americans pockets, is largely boosting economic recovery prospects for the world’s largest economy.
Vaccination optimism
President Joe Biden said he will double his vaccination plan after reaching his previous goal of 100 million shots 42 days ahead of schedule, both of which support optimism in the dollar.
Improving labour market picture
U.S. jobless claims report saw the number of people seeking unemployment benefits fell sharply last week to 684,000, the fewest since the pandemic erupted a year ago and a sign that the economy is improving.
Eurozone uncertainties
The European Union’s slow vaccination rollout and bickering with former member Britain over vaccine exports become a dominant theme, in addition to rising cases becoming a concern. Increases in new daily cases in Italy, France, Germany and Poland have forced new lockdowns and restrictions. All of which has also helped flow back into safe-haven USD.
DXY Technical overview
Price action via the weekly chart view has made a successful break above the big supply area, which is seen at the range of 90.25-50. The move is somewhat reminiscent of April 2018, a closure above with the current weekly candle would be very encouraging for the bulls. A successful retest and hold will be that further needed confluence for that bullish momentum to resume. As a consequence, the dollar’s peers will be subject to deeper needed corrections, following such storming moves higher from March - December 2020.