Economists: Rebound To 114.8 Peak Of USD Index Is “Not Ruled Out”

The U.S. dollar has been in great shape in 2022 despite the global economic slowdown and the rise in inflation.

The U.S. Dollar Index (DXY) reached a high of 114.8 12 days ago. Since then, the index has retreated, but according to a new research by Société Générale analysts, the index will probably climb back toward the high.

Greenback Index Resuming Growth Société Générale economists see a “Prevalence of Upward Momentum” after the recent pullback.

The U.S. dollar, sometimes known as the “greenback,” has shown to be a powerful opponent this year against a wide range of fiat currencies. The strength of the dollar has hurt a wide range of fiat currencies, including the euro, pound, yen, yuan, as well as the Australian and Canadian dollars. The U.S. Dollar Index (DXY) reached a peak on September 27 of around 114.8, the highest level since 2001. The value of the dollar in relation to six major fiat currencies is gauged using the leveraged DXY index.

The European Union’s euro, the Swiss franc, the Swedish krona, the British pound, the Canadian dollar, and the Japanese yen make up the group of fiat currencies that are traded against the dollar. However, the distribution of the six-currency basket is not equal, with the euro making up 57.6% of the total and the yen coming in at 13.6%. The index provides traders, analysts, and economists with an accurate assessment of the strength of the dollar relative to a basket of other currencies.

The Bretton Woods Agreement and the removal of the gold standard by US President Richard Nixon in 1973 led to the introduction of the DXY. The DXY began with a base of 100 at the time, and since then, it has increased significantly, hitting an all-time high in February 1985. The DXY reached 160.41 at that time in 1985; to break that record from the most recent high set 12 days ago, the index would need to rise by more than 39%.

Société Générale S.A. (Socgen), a financial services corporation with headquarters in France, employs economists who predict that the DXY will soon resume moving toward the 114.8 level. The top at 114.80 and a recovery toward 113.60 are both possible outcomes, according to the Socgen economists’ report from October 7. The experts also claim that a break below the 110 area would indicate a further retreat, but as of Sunday morning at 11 a.m., the DXY is trading at about 112.747. (EST).

“Only if the support zone at 110.00/109.30 gets violated would there be a risk of a deeper pullback. In such a scenario, [the] next objective could be at [the] September low of 107.60,” the Socgen economists wrote in the company’s U.S. dollar and market outlook note. “Daily RSI is still within bullish territory denoting prevalence of upward momentum,” the economists added.

According to five-day measurements, the euro is now down 2.39% versus the dollar, the yen is down 1.02%, and the pound is down 3.19%. This weekend, an ounce of gold is down 1.04% versus the US dollar while the price of an ounce of silver is down around 2.47% but is still over $20 for an ounce of .999 pure silver. The total market value of all cryptocurrencies has increased by 0.08% during the previous day, bringing the total worth of the crypto economy to $944.60 billion.

Equity markets saw negative final closes on Friday afternoon, with Nasdaq down 3.8%, Dow Jones composite down 2.05%, NYSE down 3.34%, and S&P 500 down 2.8%. The U.S. stock market lost more over one trillion nominal dollars on Friday, which is more USD value than the current market capitalization of the whole crypto-economy.