Title: US Dollar Index moves to daily highs past 95.80

11/19/2021 8:57:30 AM GMT

By: AnalysisWatch

After two consecutive pullbacks on a daily basis, the index regains its smile and returns to the upper 95.00 area by the end of the week. So far, the 95.50 area has proven to be a fairly stable area.

The dollar's recovery comes against a backdrop of improved sentiment in the US money markets, where yields are now trying to recover slightly along the curve.

Meanwhile, the FX scenario in global markets continues to be dominated by inflation concerns, as well as the prospects of an expected start to the tightening cycle by the Federal Reserve. On the latter, J. Williams of the FOMC indicated on Thursday that expectations for future increases in consumer prices continue to rise, while US inflation appears to be on a broader footing.

The index found good support at 95.50 on Thursday after being rebuffed by new cycle highs further north of 96.00 in the previous session. The dollar's intense bullishness continues to be supported by the "higher for longer" proposition in the context of current high inflation, which in turn is boosting US yields and supporting speculation of an earlier rate hike by the Federal Reserve, probably sometime in the second half of 2022. Further support for the dollar comes from the solid recovery in the labour market, Biden's infrastructure bill and positive US fundamentals data results.

Currently, the index is trading 0.33% higher at 95.83, and a break above 96.24 (the high of November 17th, 2021) would lead to 97.00 (the round mark) and then 97.80 (the high of June 30th, 2020). On the other hand, the next downside barrier is 94.96 (weekly low of Nov 15), followed by 94.56 (monthly high of Oct 12) and finally 93.87 (weekly low of Nov 9).