The US dollar index (DXY) continued its bullish momentum on Thursday as investors reacted to the relatively hawkish Federal Reserve. The market is also waiting for the upcoming US non-farm payrolls (NFP) data. It is trading at $94.40, which is substantially higher than this week’s low of $93.80.
Fed decision
The Federal Reserve concluded its two-day meeting on Thursday. The outcome of this meeting was not surprising. Indeed, it was in line with what most analysts were expecting.
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The bank decided to leave interest rates unchanged at the range of 0% and 0.25%. The bank also decided to slow down its massive $120 billion per month quantitative easing (QE) program. It did that by slashing the size of the asset purchases by about $15 billion.
It will keep cutting the purchases by this amount every month. At the same time, the officials stand ready to start slowing or accelerating the size of the asset purchases depending on the state of the economy.
The Fed decision differed substantially from that of the Bank of England. In a surprise decision, the central bank decided to leave interest rates and quantitative easing policies unchanged.
With the FOMC decision done, the next key mover for the US dollar index will be the US non-farm payrolls data that will come out on Friday. The data is expected to show that the economy added more than half a million people.
This is in line with what a job report by ADP showed on Wednesday. Still, in the past, the ADP estimate tends to be relatively divergence with that of the Bureau of Labor Statistics (BLS). Also, official numbers have differed substantially from those of estimates in the past few months.
The DXY index will also react to the latest US unemployment rate, participation rate, and wage growth.
US dollar index forecast
The four-hour chart shows that the DXY index has been in a strong bullish trend in the past few weeks. The index is trading close to its highest level since October 13. It has also moved above the 25-day and 50-day exponential moving averages (EMA).
Notably, it has also moved above the key resistance level at $94.30, which was the highest level on November 1. Therefore, the index will likely keep rising as bulls target the next key resistance level at $94.52. This was the highest level in October and September.
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