DXY Update

The Dollar Currency index known as DXY has seen the past year a sharp rise in strength, due to fear of an economical downturn and the rapid hike of interest rates by the Federal Reserve in order to fight inflation.

After launching basically all asset classes in a severe bear market the Dollar has recently weakened in the past 3 weeks and this is for many reasons.

First: The fear of a looming recession

The potential rise in unemployment made it harder for the FED to continue by raising rates policy knowing that this could quite possibly launch the U.S economy into recession.

Second: International pressure

Many countries and international corps have requested the U.S FED to stop raising rates at the same rates it has been doing since the start of the year. Because they fear a new liquidity squeeze and debt crisis in emerging economies whose currency got totally rekt against the U.S Dollar.

Third: Speculation on FED pivot

Because of the two reasons we mentioned there have been higher expectations of a fed pivot and since markets are usually forward-thinking they tend to price in future decisions and outcomes long before anything can be verified.

What to expect?

We can't for sure what will happen but we can rely on the 50EMA, trendline, and support to try to understand DXY moves. If DXY holds on to any o that support we can expect higher highs before going down. Also, most of the other indicators we have today show a similarity with the events that happened in the 1970s and 80s, and then DXY went to a staggering 165 points which are far from what we are today.

On the Macro level, we remain bearish this doesn't exclude the possibility of market rallies in the short run because there is just too much pressure on shorts and puts which may fuel upside movements like we saw last week.