The US Dollar Index has reached an 11-week high as it continues to climb following a strong surge the previous day. The rise in the index is attributed to mostly positive economic data from the US and hawkish comments from Federal Reserve officials. The DXY is currently at its highest level since June 7, reaching around 104.17. Traders are now eagerly awaiting Fed Chair Jerome Powell’s speech at the Jackson Hole Symposium, hoping for indications that the Fed will maintain higher interest rates for a longer period.
On Thursday, despite a disappointing reading of monthly PMIs for August, the US economic calendar revealed mostly positive signals. The US Durable Goods Orders for July experienced the largest decline since April 2020, but Durable Goods Orders excluding Transportation exceeded expectations. The Chicago Fed National Activity Index and the Kansas Fed Manufacturing Activity Index also showed improvement, while weekly Initial Jobless Claims and Continuing Jobless Claims indicated positive employment conditions. Former St. Louis Federal Reserve President James Bullard’s hawkish remarks further bolstered the strength of the US Dollar.
However, optimism regarding US-China trade relations has diminished, with the Chinese Commerce Ministry expressing concerns over economic and trade matters and voicing opposition to potential US arms sales to Taiwan. This geopolitical tension, along with pre-event anxiety surrounding Powell’s speech and sluggish US Treasury bond yields, increases the demand for the safe-haven US Dollar. Looking ahead, traders will closely monitor Powell’s speech for any indication of future rate cuts, which could impact the direction of the US Dollar Index.
In technical analysis, the US Dollar Index has broken through a key resistance line and is now targeting May’s peak of 104.70. This indicates that there is further room for the DXY to climb in the near term.