US dollar remains bullish as asset shrinkage kicks in
As risk appetite increased and stocks gained on Friday, the greenback fell from a nine-and-a-half-month high, but the near-term outlook remained relatively positive.
As central banks begin to reverse stimulus related to the COVID-19 pandemic, dollar bulls are supported by fears that the delta variant of COVID-19 could block the global economic recovery.
A measure of the dollar’s strength against six rivals hit its highest level since November earlier this month, before trading down 0.1% to 93.491 index points. 1% gain for the week, highest gains in two months
The US dollar index peaked in a double-top move in a monthly chart the day before, but did not offer daily confirmation. A clean break of the now-supported key obstacle of 93.20 was achieved shortly thereafter.
This means that price is likely to extend its recent gains to the annual high around 93.45, but any further gain will be challenged by an overbought relative strength index.
The chances of seeing 94 index points on the chart cannot be ruled out if dollar bulls ignore RSI signals and break through the resistance band of 93.50.
The minutes of the recent US Federal Reserve meeting also gave the US dollar a boost, with hints that asset reduction could begin as early as 2021. Forex traders are now eagerly awaiting more hints of a reduction in equity. assets that should be discussed at Jackson Hole. conference in the coming days.
The death toll from COVID-19 and its Delta strain continues to climb steadily, with the world’s largest economy recording the highest number of deaths since the first quarter.
Foreign exchange markets were also affected by the loss of riskier currencies; The Australian and New Zealand dollars hit nine-month lows.
Despite being on lockdown to curb the latest COVID-19 outbreak, the Australian dollar has missed its best performance since September 2020 by 3% so far this week.
As it announced its policy decision earlier in the week, the New Zealand Reserve Bank delayed its interest rate hike.
Additionally, the New Zealand dollar fell 2.9% for the week, its lowest level since September 2020. COVID-19 continues to spread across the country, pushing it into lockdown.