"Return of the Dollar King?" Will ICE Dollar Index Soon Break Above the 200-Day Moving Average.

According to data from the Dow Jones market, an index closely watched for measuring the relative value of the US dollar against other major currencies is about to break its 200-day moving average line for the first time since December 6, 2022. As of now, the ICE US Dollar Index (DXY) is trading at 103.45, and it only needs to stay above 103.54 to end its 173-day streak of trading below the 200-day moving average. According to Dow Jones data, this is the longest period of decline for the US dollar since the 209-day decline that ended on March 25, 2021. Market analysts pay attention to assets or currencies breaking their moving average lines as a sign of approaching trend changes. The breakthrough of the 200-day moving average will mark a significant turning point for the US dollar during the summer. After months of continuous decline, the US Dollar Index has risen 3.7% from its closing low on July 13, 2023. In fact, the US dollar has been sliding since it reached its highest point in over 20 years at the end of September last year. FactSet data shows that the US Dollar Index increased by nearly 20% from early 2022 to the peak in September. Matt Miskin, Co-Chief Investment Strategist at John Hancock Investment Management, said, "The rebound since mid-July may have made traders who heavily shorted the US dollar earlier this year feel the negative impact of the market." Steve Englander, Head of North America Macro Strategy at Standard Chartered Bank, said, "There has always been some meaningful follow-up after breaking the 200-day line since 2020. The market will certainly pay attention to this." The central role of the US dollar in the global financial system means that its rise may have a wide-ranging impact on the market. Miskin and Englander point out that it may affect stock, bond, and commodity prices, as it did in 2022. According to FactSet data, approximately 40% of the revenues of S&P 500 companies come from overseas. Last month, the index fell by 3%. Several factors contribute to the strength of the US dollar, including the better economic conditions in the United States compared to Europe. Miskin pointed out that strong economic growth could lead to a resumption of inflation in the US, which is helping to boost the US dollar as it drives US bond yields, including adjusted "real yields." The expectation that US interest rates may remain at higher levels than other major economies, including Europe, the UK, and Japan, also helps support the currency.