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Michaël van de Poppe - 13 September 2022

$DXY and €EUR/$USD!

In this blog post, we take a look at $DXY and €EUR/$USD!

DXY

The U.S. Dollar Index tracks the strength of the dollar against a basket of major currencies. DXY was originally developed by the U.S. Federal Reserve in 1973 to provide a trade-weighted average value of the U.S. dollar against global currencies. U.S. Dollar Index goes up when the U.S. dollar gains "strength" (value), compared to other currencies. The following six currencies are used to calculate the index:

  1. Euro (EUR)

  2. Japanese yen (JPY)

  3. Pound sterling (GBP)

  4. Canadian dollar (CAD)

  5. Swedish krona (SEK)

  6. Swiss franc (CHF)

DXY Technical Analysis

Bias: Bearish

With the ECB's rate hike, the Euro is in renewed upward momentum. This strength is immediately visible in the DXY as the downtrend in the chart. Most likely this will continue until the next FOMC meeting in 9 days.

Now we take a look at EUR/USD!

EUR/USD Technical Analysis

Bias: Bullish / Neutral

So what is very clearly visible in the Euro is a bounce rather than the previous breakouts to the downside with a bearish retest. This at least gives some room up to 1.03. Remember well that ECB policy at the moment is twofold. We have a 75bps hike to strengthen the Euro and fight inflation, but also printing money to support households and buying bonds from the weaker economies because otherwise, these countries will collapse. The trajectory of the Euro is still very bearish long.

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