All Eyes On USD – Which Way Next For The Greenback

Justin Freeman

All Eyes On USD – Which Way Next For The Greenback

The US Dollar Basket index has finally broken 100, which has set an important marker for the rest of the market. The index, which measured dollar performance against the basket of other major currencies, first reached the psychologically important price level on 4th April 2022. All eyes are now on whether it can hold above 100.

It’s a big deal. The index acts as a bellwether of the global economy and measures the appetite for risk-on assets ranging from equities, AUD, NZD, commodities and even crypto. Money drains out of the dollar when bullish sentiment dominates. The reverse is also the case, and the rise in USD dating back to June 2021 is now seen as a leading indicator of the weakness in equity markets in Q1 of 2022.

USD Basket Index – Weekly Price Chart – 2019 – April 2022 – Hitting 100

USD Basket Index - Weekly Price Chart – 2019 – April 2022

Source: IG

Technical Analysis of USD Basket Index

So far, technical analysis points to further strength for the USD:

  • During the multi-month bull run, there have been no signs of the supporting trendline being breached
  • The double-bottom price pattern formed by the lows of January and May 2021 was confirmed on 29th March 2021, when the price broke above 93.47
  • The next significant resistance level is 103.96, which marks the intraday price high of 23rd March 2020
  • The one caveat is that price can sometimes be drawn to an obvious target; for USD, that level is 100. Even if that were the case, there is ample room for price to consolidate and trade sideways before it begins to test the supporting trendline.

USD Basket Index – Weekly Price Chart – 2015 – April 2022 – Double or Triple Bottom

02 USD Basket Index - Weekly Price Chart – 2015 – April 2022  

Source: IG

Macro-Economic Pointers From USD Strength

One of the reasons for USD strength is the prospect of rising interest rates. The dollar is seen as one of the winners when interest rates rise; however, there could be more to it than that.

The Covid pandemic that dominated the markets for almost two years was an event that realigned asset valuations and the prospects of many areas of the global economy. However, it was a one-headed monster, and in hindsight, some of the challenges it threw up appear relatively straightforward. Will there or won’t there be an effective vaccine? Will new variants be more contagious, more virulent, or both?

As it turned out, the investors who backed the pharma industry to be able to create vaccines in a relatively short time were proved correct and would have made substantial returns. On their side was the fact that many of the decisions were binary, but that has now changed, with dilemmas for investors being faced on various fronts.

The Ukraine-Russia conflict and spiralling oil prices have been followed by the stock market darling and FAANG member Netflix losing 30% of its value after posting disappointing Q1 earnings. At this point, the dollar looks to be a measure of uncertainty as it is economic fundamentals. Until that changes, the path of least resistance still appears to be upward.


Crowdsourcing information about scam brokers can help others avoid falling into the traps set by disreputable brokers, and you can share your experiences here. If you would like to know more about this particular topic or have been scammed by a fraudulent broker, you can also contact us at [email protected]

Justin Freeman

Latest news

Bitcoin Starts to Walk on Shaky Feet
Last November, reeling from the sudden demise of the FTX crypto exchange, Bitcoin lost more than 15% of its value. Read more

Safest Forex Brokers 2023

Broker Info Best In Customer Satisfaction Score
#1 AvaTrade LogoYour capital is at risk Founded: 2006 Globally regulated broker
Number One Broker
#2 BlackBull Markets LogoYour capital is at risk Founded: 2014 Global Forex Broker
Number One Broker
BEST SPREADS Visit broker
#3 73 % of retail CFD accounts lose money Founded: 2014 Global Forex & CFD Broker
Number One Broker
Best Trading Conditions Visit broker
#4 Forex Broker eToro Logo67% of CFD traders lose Founded: 2007 Global CFD & FX Broker
Number One Broker
#5 Plus500 Logo79 % of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you can afford to take the high risk of losing your money. Founded: 2008 Global CFD Provider
Number One Broker
Best Trading App Visit broker

    Forex Fraud Certified Brokers

    XM Logo
    BlackBull Markets Logo
    IQ Option Logo
    ATFX Logo
    LegacyFX Small Logo
    IC Markets Logo
    Exness Small Logo
    City Index Logo
    HYCM Logo
    OctaFX Logo
    AvaTrade logo Logo
    skilling logo
    CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. Between 74-89% of retail investor accounts lose money when trading CFDs. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.