2022/02/28 (010) Technical Analysis – DXY

The USD As A Possible Safe Haven Currency?
The Fed Is Likely To Raise Interest Rates Most In Our West!
Also Because US Economy Outperforms All Other Western Countries?!


In July 2001, the DXY (USD Index) traded at a peak of 121,020 points. Before falling to as low as 111,310 points in September 2001. Just after the terrorist attacks on the World Trade Center in New York. Nevertheless, the DXY (US Dollar Index) then recovered just as quickly, up to 120.280 (January 2002) and or 120.40 (February 2002) before the currency market, which distributed currency traders around the world, then the DXY (US Dollar Index), in the following next 6 years (even from 2002 to 2008), down to 70.69 points (March 2008).

Since then (since March 2009) the FED has responded with decidedly cheap money – as a result, assets bubbles formed first in the 3 major US Stock Markets. So that the average valuation of US Stocks (even like the Dow Jones, S&P 500, and or NASDAQ 100 rose in historical comparison. And or so-called cryptocurrencies were created. And last but not least, inflation seems to be galloping away. Due to the irresponsible fiscal policy of the US Democrats. Because the USA – after Trump organized the US economy into an independent energy country for the first time in several decades – not only has to import oil from abroad again. But because the US Democrats also distribute state support to their voters. And with their US Lockdown Policy, they mask the country in the truest sense of the word down – and thus bring the US economy to a standstill. And thus drive up the prices of goods. Because the money supply in circulation is not only growing faster. But because the production chain also starts to stutter. There are delivery bottlenecks. So that it is hardly possible that scarce supply of goods, let alone production cost prices, come down. On the contrary. And that with a historically negative trade balance. What means, that the US foreign debt is growing and higher interest rates have to be paid. The debt arises because spending on imports exceeds revenue on exports of goods.

The bulls are trading the DXY while todays monday trading session back around 97 points – more or less 2022 yearly highs
The USD crossed 97 in the early Asia trading on Monday closing on the strongest level since July 2020 as investors resumed flight to safety as fierce fighting continues in Ukraine. Ukrainian officials are set to meet Russian counterparts at the Belarus border, but Ukraine voiced skepticism about the talks. Earlier, G7 nations agreed to exclude some Russian banks from the SWIFT and to target the Russian Central Bank’s international reserves. On Monday closing the DXY was traded a little bit under 97 points – still on the strongest level since July 2020 as investors resumed flight to safety as fierce fighting continues in Ukraine. Ukrainian officials are holding talks with Russian counterparts at the Belarus border, but Ukraine voiced skepticism about the talks. During the weekend, G7nations agreed to exclude some Russian banks from the SWIFT and today Biden’s administration banned U.S. people and companies from doing business with the Bank of Russia, the Russian National Wealth Fund and the Ministry of Finance.

The japanese Yen – 2nd highest weighted currency of the DXY (US dollar Index) with 13.6% – hovered around 115.5 per dollar on Monday, erasing gains from earlier in the session as investors preferred the safety of the US dollar. Investors rushed for safer assets after President Putin put Russia’s nuclear deterrence forces on high alert Sunday amid a global backlash against the invasion, with Western nations ramping up sanctions against Russia’s financial system. The Japanese government is also crafting financial sanctions that will inflict “maximum costs” on Russia in response to its invasion of Ukraine. Meanwhile, Japan’s core inflation rate slowed to 0.2% in January, falling short of expectations and remaining well below the central bank target. The Bank of Japan has repeatedly maintained that it will keep ultra-loose monetary policies to support the economic recovery and achieve the 2% inflation target, highlighting one of the most dovish positions among major central banks.

The euro  – highest weighted currency of the DXY (US dollar Index) with 57.6% – was changing hands around $1.125, recovering from almost $1.115, its weakest level since June 2020 as investors continued to monitor developments around the Russia-Ukraine war. Russian troops were closing in on the capital city of Kyiv but signals that Russia could agree to hold off the attack and look for a diplomatic solution lifted sentiment. Meanwhile, traders seek further clues on the ECB monetary policy as price pressures intensify in the Euro Area. After a meeting with euro-area finance ministers in Paris, ECB President Lagarde said that the central bank stands ready to take whatever action necessary within its responsibilities to ensure price stability and financial stability. While it’s too early to judge the overall economic impact of Russia’s invasion of Ukraine, persistent uncertainty will likely drag on investment and consumption and impede growth, she added.

Furthermore, the Russian ruble tanked as much as 40% to 118.6 per dollar on Monday, hitting anew record low after the whole Western nations announced new sanctions against Russia over its invasion of Ukraine. The US, EU and their allies agreed on Saturday to remove key Russian banks from the SWIFT interbank messaging system and freeze the assets of Russia’s central bank, limiting the country’s ability to access its overseas reserves. The Central Bank of Russia appealed for calm on Sunday amid fears that there could be a run on banks. Analysts suggested that unless Russia finds alternative means of reaching the global financial system, it faces the risk of being isolated from the global economy. Investors’ concern also grew after Putin put Russia’s nuclear deterrence forces on high alert Sunday. Despite the escalation, Ukrainian and Russian officials have agreed to hold talks near the Belarusian border “with no preconditions.”

By the way, the RUB (Russian Rouble)
is not a part of the DXY (US Dollar Index).

Nevertheless, I would like to point out here at this point, that the USDRUB touched an all-time low of 116 after Western nations announced they would cut off a “certain number of Russian banks” from the SWIFT international payments system and impose restrictions on Russia’s Central Bank. Meantime, Japan Sunday joined the move, with Prime Minister Fumio Kishida mentioning that Tokyo will put sanctions on President Putin and extend $100 million in emergency humanitarian aid to Ukraine. The Central Bank of Russia appealed for calm Sunday amid fears that there could be a run on banks.

The bulls` fight for new annual highs has begun
The intermediate highs from autumn 2021, at more or less 94.5 points, have held up. And were defended by the bulls from above at the end of January – the DXY (US Dollar Index) was, even while january 2022, no longer traded below 94.5 points.

Nothing new! What is new, are the attacks by the bulls, while since last Wednesday it has become clear to even the last skeptic that the Fed will raise interest rates. The foreign exchange market is not concerned with the question of whether interest rates will be raised. Rather, by how many basis points? And in how many steps? Which also causes the yield curve to fluctuate…

96.938 (2021/11/21 highs) have to be cracked
The break-out of 15th December failed. While thefalse break-out on the last 3 trading days in january manifested a trendreversal formation – which gave bears air to push the DXY down 95.137 points (while the 1st febraury week. Therefore, it is now important for all bulls to use the momentum to aim for new highs for the year first. And then to defend them. How high and how fast that will be, I don’t know either! But I do know that I will continue to analyze and comment on our DXY trading capability for you in the coming weeks, to the best of my knowledge and beliefs.