Last Friday witnessed a fabulous employment data by the US, among which the non-farm payrolls reached 531k and unemployment rate declined to 4.6%, leading to a short-term increase of USDX, which then fell back from a high level due to a plummeting US bond. However, I still believe that USDX is likely to be bullish in the future, because of the following reasons.
Firstly, the US recently released strong economic data, indicating its obvious economic superiority compared with other countries in Asia and Europe, which is highly conducive to USD. Investors should keep paying attention to the performance of the US economic data, in addition to focusing on the future public speeches by the Fed officials. It is estimated that the officials will probably deliver hawkish rate-hike messages in the future based on the recent upbeat economic data of the US.
Secondly, the final pass of Bidens infrastructure by the US congress is a shot in the arm to the US economy, very favorable to USD. The recent weak US 10-year bond that curbs USXD from rising is expected to rally and then end its adjustment, under the pressure of high inflation and interest hike. Hence the fall of the US bond that affects USXD adversely will eventually come to an end.
Thirdly, although the Europe also encounters a severe inflation, the latest economic data published by Germany and the EU doesn‘t perform well due to the rocketing energy prices and the shortage of chips which have wrecked havoc on the European car industry etc, greatly reducing the efficiency of the European central bank’s interest hike in an indirect way. At the same time, with a declining economy and increasing inflation, strictly speaking, the euro zone has stagnated, depreciating most of currencies in the region. Therefore, weak EUR makes strong USDX.
Technically speaking, USDXs great resistance is located at the level of 94.742. If it breaks upward successfully and stay stable, USDX is estimated to reach the level of 98, indicating a bullish outlook in the future.
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