US Dollar Index ends week marginally lower despite Fed’s rate hike

The greenback lost strength on Friday and erased part of the previous day’s gains. The US Dollar Index was about to end the week marginally lower, hovering around 96.80 after being unable to hold on top of 97.00. 

Still, the DXY ended far from the lows. Before Janet Yellen press conference it bottomed at 95.97, the lowest since November and then bounced sharply to the upside. With the post-Fed rally, it managed to recover relevant technical levels like the 96.50 zone and climbed to the previous trading range. 

Levels to watch 

In the short-term, to the upside, a key level is located around 97.40/50. A break higher could give momentum to the USD for a stronger recovery. On the flip side, the first area to watch is 96.50: if it drops and holds under that area, the bearish pressure is likely to intensify, exposing 96.00 and 95.45/50. 

Between the Fed and data

Most economic reports from the US showed numbers below expectation, like Friday’s housing starts and consumer confidence. On Wednesday, the negative surprise included retail sales and CPI. The positive news came from the labor market and some manufacturing indicators.

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Markets expected a rate hike from the Fed. The central bank delivered despite the latest data. The greenback gained momentum with the release of the FOMC plan and comments regarding balance sheet normalization.

The US dollar is about to end the week little changed. The strength from Fed’s announcements was offset by US economic data and also by the change in the rhetoric of other banks, like the Bank of Canada, that shifted from a neutral to a hawkish stance. 

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