Anything is possible for the Dollar
The above graph is line chart of DXY from 1stNov 2016 to till date.
In our Graph of the Week dated on 19th Jan 2017 we had talked about a long awaited correction in the DXY in response to the rather steep climb post the surprise win for Trump in the American election. The Trump trade, as it is being called, resulted in US Treasury yields moving up strongly on chances of a fiscal stimulus and a loose monetary policy to boost spending and build infrastructure. The interest in Treasury papers saw DXY moving higher and trading at all time highs near 103, before falling back to 99.
It took Trump himself to unwind the trade and much of it has happened over the last month, with uncertainty arising of the impact of Trump\\`s executive orders and Trump himself talking down a strong dollar in interactions with the press. In the last week, things have quietened a bit though, with the Trump administration acknowledging the " one China policy " and a relatively smooth meeting with the Japanese PM, Shinzo Abe. The key will be Yellen\\`s bi annual testimony which will clearly point the way forward for the dollar since Yellen could continue to indicate three rate hikes for the year. Data on CPI and Retail Sales due later this week will reveal whether inflation is being buoyed up by just the oil price rise or actual spending, which would also be critical to Dollar direction.
Technically speaking, DXY has strong resistances at 101.50 and 102.80 , a breach of which could take it to record highs. Conversely the breach of the support at 99.50 would invalidate the bullish bias and we would need to reevaluate direction at that point.