The US dollar has formed a “golden cross” with great potential

On Monday, the dollar index reached levels higher than it had been at any point this year.

For the first time in 10 months, the DXY index rose above 106.

By the end of last week, a “golden cross” had appeared on the DXY chart.

For the first time since mid-March, the euro dropped below $1.06.

The amount of money that hedge funds have wagered against the euro has reached its highest level in nearly 12 months.

On Monday, the dollar index surpassed 106 for the first time since late November of the previous year.

ru.The US currency's strength is attributed to the Federal Reserve's decision to maintain interest rates higher than the market had anticipated prior to the release of the FOMC members' revised forecast on September 20. This has caused yields on 10- and 30-year US government bonds to reach new multi-year highs, according to profinance.ru.

Societe Generale believes that the Fed factor has already been factored into prices, and that the dollar may require a new impetus for growth. This could be provided by weak macroeconomic statistics from Europe, such as the European Commission's confidence indices data due to be released on Thursday.

Bloomberg reports that hedge funds are heavily selling the euro, with their bets against the eurozone currency reaching their highest level in nearly a year. Investors anticipate that the European Central Bank will conclude the cycle of interest rate increases that began in July of last year.

AVM Capital, a hedge fund, stated that Europe is having difficulty with sluggish growth and persistent inflation, while the US economy is still doing well due to robust consumer spending. This is beneficial for the US dollar, and the euro is likely to remain weak for the next half year.

Capital Economics acknowledges the potential for the euro to reach parity with the US dollar by the end of 2021. Meanwhile, RBC Capital Markets forecasts that the euro will reach the $1.02 mark by the second quarter of 2024.

Late last week, the US Dollar Index (DXY) formed a golden cross on the daily chart, which suggests that there is greater upside potential.

In early August 2021, a technical analysis figure was formed for the first time in over a year, resulting in DXY gaining more than 24% in the following period.