DXY (US DOLLAR CURRENCY) Index Analysis 08/01/2022Elementary Analysis:
The U.S. dollar index (USDX) is a measure of the value of the U.S. dollar relative to the value of a basket of currencies of the majority of the U.S.'s most significant trading partners. This index is similar to other trade-weighted indexes, which also use the exchange rates from the same major currencies.
Understanding the U.S. Dollar Index (USDX):
The index is currently calculated by factoring in the exchange rates of six major world currencies, which include the Euro (EUR), Japanese yen (JPY), Canadian dollar (CAD), British pound (GBP), Swedish krona (SEK), and Swiss franc (CHF).
The EUR is, by far, the largest component of the index, making up 57.6% of the basket. The weights of the rest of the currencies in the index are JPY (13.6%), GBP (11.9%), CAD (9.1%), SEK (4.2%), and CHF (3.6%).1
The index started in 1973 with a base of 100, and values since then are relative to this base. It was established shortly after the Bretton Woods Agreement was dissolved. As part of the agreement, participating countries settled their balances in U.S. dollars (which was used as the reserve currency), while the USD was fully convertible to gold at a rate of $35/ounce.
An overvaluation of the USD led to concerns over the exchange rates and their link to the way in which gold was priced. President Richard Nixon decided to temporarily suspend the gold standard, at which point other countries were able to choose any exchange agreement other than the price of gold. In 1973, many foreign governments chose to let their currency rates float, putting an end to the agreement.
An index value of 120 suggests that the U.S. dollar has appreciated 20% versus the basket of currencies over the time period in question. Simply put, if the USDX goes up, that means the U.S. dollar is gaining strength or value when compared to the other currencies. Similarly, if the index is currently 80, falling 20 from its initial value, that implies that it has depreciated 20%. The appreciation and depreciation results are a factor of the time period in question.
The U.S. dollar index allows traders to monitor the value of the USD compared to a basket of select currencies in a single transaction. It also allows them to hedge their bets against any risks with respect to the dollar. It is possible to incorporate futures or options strategies on the USDX.
These financial products currently trade on the New York Board of Trade. Investors can use the index to hedge general currency moves or speculate. The index is also available indirectly as part of exchange traded funds (ETFs), options, or mutual funds.
we have Analyzed the DXY on 04/01/2021 and it went exactly as we have Predicted it with Laser Cut Precisions which is linked to this idea too for our reference:
Fundamental Analysis:
looking at the current inflation Rate and given interest rate by FED, we can have some vision of a sad ending for USD, it seems to be a bit over valued and shall correct itself soon. however the best way of understanding this situation is to look at the current US Markets and the related Indices such as US500, US30, and Nasdaq, which we have noticed many sign of upcoming beer Market and Collapse of the Share prices.
we have analyzed these Markets and their Related Indices in details and published them few days back which are as follow:
S&P US500:
DJI US30:
NDX Nasdaq 100:
we are very much pessimistic on their Bullish trend continuation and we believe soon they will start falling and the bullish trend will reverse to a bearish market.
now post this Crisis we have 2 upcoming scenarios:
1- the Fed will Burn the flashed cash of the liquidated positions to reduce the inflation and adjust the economic outcome to have a better future on the US Market which will conclude in the Range Pricing of DXY.
2- the Fall of Market will work as an Initiation of a Fall in the DXY which will ultimately Couse the US Economy to come to the big halt, since this will result the US policy makers to start a new War in the world in order to sell their Millinery products to the Engadget countries in order to earn and receive the additional value of their exported goods in order repair the damaged economy and continue their administration.
any which ways the chances of DXY to shoot for higher levels are less but not impossible.
as we red the reasons for the fluctuation of the dollar index in the elementary analysis we can have a look at index makers such as EUR ad GBP Indices to Gauge the situation of DXY.
we shall Post their analysis soon and will link them to this Idea.
Technical Analysis:
there exist a Hidden bearish Divergence of Price and MACD after the Regular Bearish Divergence which can be strongly interpreted as the Bearish trend Continuation as the regular bearish divergence has Reversed the Previous Bullish trend to a bearish trend and the Said Hidden Bearish Divergence is the sign of Bearish Market Continuation.
at present the Value of the Index has Stagnated to a heavy Resistance area where it seems to be Distributing and deluding the Volumes which can be a good sign of Retracement reversal and start of the new Bearish wave and end of the current retracement cycle.
there are some chances that the DXY have more Uptrend development to the 61.8% level of Fibonacci retracement but chances of breaching the Specified Resistance area are very less even if the Price reach to it Mid Levels...
there are few support areas defined with Fibonacci retracement where DXY can show some Reaction on the way to the specified Targets.
there are total of 2 Targets defined by Fibonacci projection of the same Bearish wave which price is currently at its golden zone.
the 1 TP is very realistic to happen by end of 2024 and the second is depending on the words Peace situation.
