The United States dollar is the most important currency in the world. It is used directly and indirectly by all people from around the world. Most institutions too use the dollar for global transactions. The dollar index is used by traders as a barometer for the performance of the dollar. It provides a weight for the dollar in comparison to its other global peers. Therefore, a big US dollar index number is usually an indicator of a strong dollar.
After rising for the first part of the year, the dollar index has started to fall in the past few weeks. It has fallen from a high of $95.2 and reaching $93.92. This price is slightly higher than the multi-weekly low of $93.4 which the pair reached yesterday.
The recent downward momentum came even as the Federal Reserve moved to reaffirm its previous commitment to two more hikes this year. Some analysts believe that there will be one hike this year. There are also concerns that the Fed will either halt more rate hikes or even start reducing the rate hikes by 2020. In addition, there is a belief that other central banks will begin normalizing soon with the BOE expected to hike in September.
The US dollar index current price has fallen to its 42 and 21-day moving averages. These averages are important because they represent the three and six-weeks average for an asset. The RSI is currently at 43 while the price is slightly above the middle Bollinger bands line. Therefore, in the short term, there is a likelihood that the index will move up. However, in the medium and longer term, there is a likelihood that the index will continue moving lower.