US Dollar Index expected to decline on break below support-Société Générale

USD Index
  • Société Générale predicts that the US Dollar Index (DXY) may experience significant losses if it breaks below the 100.80/00 support level.
  • The DXY is currently close to the support zone of 100.80/100.00, which is made up of graphical levels consisting of the February low and 2015 high. However, despite defending this support, there has not been a significant rebound.
  • In the event that the index establishes itself below 100.00, the downtrend could extend towards 98.90, which is the 61.8% retracement of the 2021/2022 rise.

The US Dollar Index (DXY) remains weak at the start of the new week, according to economists at Société Générale. The bank’s analysts anticipate that the DXY could suffer significant losses if it breaks below the support zone of 100.80/00. This area represents graphical levels consisting of February low and 2015 high. While the support zone has held for now, the analysts note that a meaningful rebound has not yet materialized.

To confirm a larger uptrend, the DXY needs to overcome the short-term hurdle of the 50-day moving average and a multi-month descending trend line at 102.40/102.80. However, if the index establishes itself below 100.00, the downtrend could extend towards 98.90, which represents the 61.8% retracement of the 2021/2022 rise.

These predictions by Société Générale economists are significant for South Africans because they could have implications for the country’s economy. A weaker US dollar could impact commodity prices and export earnings for South Africa, which is a major producer of precious metals and minerals. Additionally, a weaker dollar could make it more expensive for South Africans to import goods, potentially leading to inflation. As such, South African investors and businesses should keep an eye on the DXY’s movements and adjust their strategies accordingly.

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