US Dollar Index rebounds from 7-month lows ahead of the FOMC meeting
The US Dollar Index gained ground on Friday, rising above the level it opened on Monday. The greenback rose particularly against the yen and pound on Friday and remained steady versus the AUD and CAD. The loonie was the best performer boosted after the Canadian May jobs report that surpassed expectations. The pound was the worst performer on Friday and over the week affected by the results of the UK general elections.
The DXY climbed to 97.44, reaching the highest level in a week. Then pulled back and near the end of the week, it was hovering around 97.20/25, up 0.65% for the week.
The decline in US bonds despite the UK elections pushed yields to the upside, adding support to the US dollar. The 10-year rose above 2.20%, recovering from multi-month lows.
Next week, the key event for markets will the FOMC meeting. On Wednesday the Federal Reserve will announce its decision on monetary policy. A rate hike is expected. Whatever the Fed does, volatility is likely to rise with the event.
Levels to watch
The index ended the week moving away from 7-month lows. It is still not clear if the current recovery will be sustainable or not.
To the downside, support levels might lie at 97.05 (Jun 9 low), 96.75 (May 225 & 31 low) and 96.40/45 (weekly low). To the upside, resistance could be seen at 97.40/45 (Jun 9 high) and 97.65 (May 30 high).
