US Dollar Index (DXY) Price Analysis: Reaches a seven-day high around 102.731, on risk-aversion

• The US Dollar index continues its weekly rally, up by 0.89%.
• Risk-aversion and positive US ISM Manufacturing PMI  boost the greenback and rallies vs. most G7 currencies.
• US Dollar Index Price Forecast (DXY): The bias remains intact, though a break above 103.000 might pave the way for further gains.

The US Dollar Index, a measure of the greenback’s value vs. a basket of six foreign currencies, climbs 0.75% due to a risk-aversion Wednesday trading session as the New York session wanes and Asia takes over. At the time of writing, the DXY sits at 102.549.

The market mood remains negative, with US bourses closing lower while Asian equity futures register losses. Stronger than expected ISM Manufacturing PMI data pressured the buck against major currencies, lifting the index. Additionally, US Treasury yields led by the 10-year benchmark note rose six bps and finished around 2.911%.

Fed speakers remain hawkish, underpinning the USD

Fed speakers crossed wires on Wednesday. The first in line was the San Francisco Fed President Mary Daly, who said that she sees a couple of 50 bps increases and added that they need expeditiously to get rates to neutral.

Late in the day, Richmond’s Fed President, Thomas Barkin, said that a recession couldn’t be found in the data or actions of business executives. At the same time, he added that a reduction in the balance sheet does a little more on top of rate hikes to tighten policy. Barkin added that comfortable with the path of rate hikes for the next couple of meetings while supporting more rate hikes.

Closing the parade was the St. Louis Fed President James Bullard. He said that “The current US macroeconomic situation is straining the Fed’s credibility with respect to its inflation target.” Furthermore, he added that the US labor markets and the US economy remain robust, but Russia’s invasion of Ukraine and a sharp slowdown in China means risk remains “substantial.”

US Dollar Index Price Forecast (DXY): Technical outlook

The DXY remains upward biased. On Tuesday, the index pierced the 50-day moving average (DMA) around 101.447 but bounced off and closed at 101.414, forming a “bullish-piercing” pattern.

Wednesday’s price action witnessed bulls entering the market, lifting the US Dollar Index above the 102.000 mark, achieving a daily close above the May 5 swing low at 102.352. Therefore, the DXY bias remains intact.

That said, the US Dollar Index’s first resistance would be 103.000. A breach of the latter would expose the May 19 high at 103.820, followed by the YTD high at 105.005.