U.S. DOLLAR: Upcoming Price Push?

The US dollar index (USDX or DXY) is a foreign exchange index which tracks the value of the US dollar by means of a currency basket. The currency basket consists of the following six currencies: Euro, Japanese Yen, British Pound, Canadian Dollar, Swedish Krona and the Swiss Franc. The US dollar is probably the trading instrument with the greatest influence on all other asset classes. Be it the international equity and bond markets, commodities and precious metals, currencies (incl. crypto), etc., the U.S. dollar is the most important trading instrument. They are all influenced by the course of the US dollar. This makes it all the more worthwhile to follow the performance of the US dollar in order to better anticipate certain movements. After all, an interest rate hike by the Fed on March 22, 2023 is on the horizon. A rate hike of 25 basis points is expected by the market, but a 50 basis point increase could also be on the horizon. This means that the US dollar is likely to gain strength in the coming weeks. In addition, an inverse shoulder-head-shoulder formation is emerging in the chart of the DXY. Should the formation be fully developed, the index should gain strength in the coming weeks and months and rise to around 109.70 points. What impact will a strong U.S. dollar have on the global financial system? For some economies, such as Japan, it will become more expensive to buy additional U.S. dollars in order to support their own currency. India, on the other hand, is said to have recently sold part of its dollar reserves in order to stop the decline of its own currency. The euro zone is also feeling the effects of a stronger dollar, as imports of goods and raw materials paid for in U.S. dollars are becoming more expensive, further fueling inflation. Internationally active U.S. companies are likely to report lower profits due to the stronger U.S. dollar, which will have a negative impact on the stock market. All in all, we are therefore likely to face more turbulent times!

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