The US dollar index (DXY) slumped to the lowest point since August 31st as investors focused on the next actions of the Federal Reserve. The index fell to a low of $103.25, which was much lower than the year-to-date high of $107.34.
Crude oil and bond yieldsThe US dollar index crash has coincided with the ongoing retreat of crude oil prices. Brent, the global benchmark, dropped to $79.93 while West Texas Intermediate (WTI) slipped to $74.95. Oil has dropped from the year-to-date high of almost $100.
As a result, data by AAA shows that America’s gasoline prices have moved downwards in the past few months. The average gasoline price in the US stood at $3.25 on Monday, much lower than where it was earlier this year.
This performance means that America’s inflation will continue falling in the coming months since gasoline is a major inflation driver. The most recent data showed that the headline CPI dropped from 3.7% in September to 3.2% in October.
The DXY index crash has also coincided with the sharp decline of US bond yields. The 10-year Treasuries dropped to 4.46% while the 30-year fell to 4.56%. This performance is a sign that investors anticipate the Federal Reserve to maintain rates at the current level and then slash them in 2024.
Meanwhile, the dollar index has also dropped as the VIX index has plunged to the lowest point since March 2020. The VIX, popularly known as the fear gauge, measures the amount of volatility in the financial market.
Further, the fear and greed index has jumped to the greed zone of 68. This is a sign that investors have now embraced a risk-off sentiment. This explains why the dollar has weakened against other currencies like the Australian dollar, Japanese yen, and Swiss franc.
US dollar index forecast
The DXY index has been in a strong bearish trend in the past few days. It formed a small double-top pattern at $107.34, which is usually a bearish sign. The price has crashed below the 50-day and 100-day Exponential Moving Averages (EMA).
It has also flipped below the important support point at $104.70, the highest swing on May 31st. The Relative Strength Index (RSI) and the Stochastic Oscillator have continued falling. Therefore, the index will likely continue falling as sellers target the key support at $100.78, the lowest swing on April 13th and 3rd February.
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