The US Dollar Index (DXY) is rising today as traders wait for the first estimate of US GDP for the third quarter.
Analysts expect the data to show that the U.S. economy has grown by more than 30%.
This is also in response to the rising number of Covid 19 cases in Europe and the U.S.
The US Dollar Index (DXY) has risen slightly as traders respond to the rising number of Covid-19 cases in the US and Europe. The index is trading at $93.43, which is much higher than this week’s low of $92.47.
US Dollar Index Rises
Increase in Covid-19 cases
The US dollar is both the American currency and the world reserve currency. As a result, investors tend to rush to its safety when there are risks in the market. The current risk is that the number of Covid 19 cases in the United States and Europe is rising sharply.
In the United States yesterday, the government confirmed more than 74,000 cases of Covid-19, bringing the total number of infected Americans to more than 8.93 million. If the current trend continues, this means that the country will reach more than 10 million cases in November. The country also confirmed more than 800 deaths, bringing the total to more than 228,000.
The same trend can be observed in Europe. In France, the government confirmed more than 33,000 cases, bringing the total number of cases to more than 1.2 million. More than 35,000 people have died. In Germany the government reported more than 14,900 cases, the highest daily number. Other European countries such as Spain, Italy and Belgium have also reported more cases.
As a result, these countries have introduced more restrictions. Yesterday Angela Merkel made an agreement to close most of the unimportant shops like restaurants and cafes until the end of November. In return, the government will provide them with 10 billion euros. In France, the government of Emmanuel Macron has also introduced several restrictions to stop the spread.
US GDP data in advance
The dollar index is also rising ahead of the first reading of third quarter GDP data from the US. Analysts expect the data to show that the economy regained momentum in the third quarter after falling by more than 30% in the second quarter.
According to Yahoo, economists expect the economy to have grown by 32% in the quarter. This will be driven by a 38.2% increase in personal consumption and a 2.9% increase in the GDP Fruit Index. Daniel Silver, an economist at JP Morgan, also expects the data to be 36.7%, which would be the largest quarterly increase ever.
Nevertheless, the US faces two major challenges. Firstly, as mentioned above, the number of Covid cases is rising, which means there is a risk that they will fall back into recession. Second, Congress has failed to provide the stimulus that analysts believe is necessary to cushion the economy.
The Dollar Index will also react to the latest data on unemployment claims. Analysts estimate that more than 775,000 people received unemployment benefits last week. This will be the lowest number ever recorded.
Technical Outlook for the US Dollar Index
Technical table of the US Dollar Index
On the four-hour chart, we can see that the US Dollar Index is trading at $93.38, as yesterday’s rally is paused. It is slightly above the 25-day and 15-day exponential moving averages. It is also forming a bullish pennant pattern, which is usually a continuation pattern. As such, I expect the index to continue to rise as the bulls target the next resistance level at $93.80. Start Forex with our free trading courses….