US Dollar Index grinds higher around multi-year top after rising the most in a week. (Pivot Orderbook analysis)

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• US Dollar Index grinds higher around multi-year top after rising the most in a week.
• Strong yields, geopolitical fears underpin the US dollar’s run-up.
• Chatters over a surprise 1.0% rate hike also favor bullish momentum.
• Two-month-old resistance line gains attention as 21-DMA restricts short-term downside.

The pair currently trades last at 110.16.

The previous day high was 110.18 while the previous day low was 109.48. The daily 38.2% Fib levels comes at 109.75, expected to provide support. Similarly, the daily 61.8% fib level is at 109.91, expected to provide support.

US Dollar Index (DXY) gears up for another hawkish play of the Fed during Wednesday, taking rounds to 110.30 after rising the most in a week to the recently flashed two-decade high the previous day. In addition to the pre-Fed anxiety and the hawkish calls for the US central bank decision, geopolitical headlines and strong yields also underpin the strength of the greenback gauge versus the six major currencies.

“The Fed started a two-day meeting on Tuesday, with rate futures traders pricing in an 83% chance of a 75 basis-point hike and a 17% probability of a 100 bps of tightening,” said Reuters. The news joins increasing calls for a positive surprise to add strength to the DXY. The global economist Nouriel Roubini joined the league of supporters for the Fed’s 1.0% rate hike and favored the US dollar bulls.

A snap lockdown in the steel hub of Tangshan, due to China’s zero covid policy, recently challenged the market sentiment and strengthened the US dollar’s safe-haven demand. On the same line could be the news suggesting US Senators’ demand for secondary sanctions on Russian oil.

Previously, mostly upbeat US housing data seemed to have propelled the yields to favor DXY bulls. The nine-month downtrend in the US NAHB Housing Market Index precedes the Building Permits to 1.517M in August versus 1.61M forecast and 1.685M prior. However, Housing Starts improved to 1.575M compared to 1.445M market consensus and 1.404M previous readings.

It should be noted that the US 2-year Treasury yields jumped to the highest level in 15 years while the 10-year counterpart also rose to the 11-year top during the pre-Fed cautious mood. With this, the Wall Street benchmarks closed in the red while the S&P 500 Futures remain indecisive at the latest.

Looking forward, the second-tier US housing data may entertain DXY traders but major attention will be given to the Federal Open Market Committee (FOMC) showdown as 0.75% rate hike is already priced-in. In addition to the rate moves, the economic forecasts and Fed Chair Powell’s speech will also be crucial for clear directions.

Also read: Federal Reserve Preview: Forecasting 5% interest rates? Dollar to move on dot-plot, Powell’s pledges

A clear rebound from the 21-DMA, around 109.40, directs the DXY towards an upward sloping resistance line from July 14, close to 111.20 at the latest.

Technical Levels: Supports and Resistances

EURUSD currently trading at 110.16 at the time of writing. Pair opened at 109.6 and is trading with a change of 0.51% % .

The pair remains strongly bullish on the daily timeframe. It trades above its 20 SMA @ 109.27, 50 SMA 107.8, 100 SMA @ 105.85 and 200 SMA @ 101.75.

The previous day high was 110.18 while the previous day low was 109.48. The daily 38.2% Fib levels comes at 109.75, expected to provide support. Similarly, the daily 61.8% fib level is at 109.91, expected to provide support.

Note the levels of interest below:

• Pivot support is noted at 109.32, 109.05, 108.63
• Pivot resistance is noted at 110.02, 110.45, 110.72

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