The US dollar bull market is far from over, but a technical signal has to be watched out!

In the case of failure to rise above the 105 level for a long time, the dollar index may take advantage of the short-term trend to correct the recent rise, and the technical side also hinted at this possibility.

The Federal Reserve makes every effort to reduce inflation, and the dollar is optimistic in the medium and long term, but may be revised in the short term

On Monday (May 16), the performance of the US dollar index showed a range consolidation state, temporarily losing the momentum to continue rising. During the session, Williams, the third in command of the Federal Reserve, the permanent voting Committee of the FOMC and the chairman of the New York Fed, delivered a speech on inflation, interest rate hikes and other issues, saying frankly that reducing inflation is the top priority.

About inflation and the relationship between supply and demand

Williams said: the first problem is inflation. The inflation rate is too high, and it has always been so; The goal is to restore economic balance, which is a challenging task, but we are committed to this; My expectation is that the inflation rate will drop a lot next year; Demand far exceeds supply;

The tight monetary policy of the Federal Reserve can reduce demand and keep it in line with supply; We are seeing signs of inflation in a series of commodity prices; If prices are unstable, economic and employment growth cannot be achieved; The first task is to reduce inflation; We don't know how long high inflation will last.

About raising interest rates and shrinking tables

Williams said: the Federal Reserve will quickly raise interest rates to a more normal level; We need to return the real interest rate to zero; It is meaningful to raise interest rates by 50 basis points at the last meeting;

The reduction plan is having an impact on long-term interest rates; Originally, the reduction policy would not be implemented until a few years later; We have made it clear that the Fed's main tool is the federal funds rate; Further interest rate hikes by the Federal Reserve will cool the housing market.

Williams' above remarks once again showed the determination of the Federal Reserve to fight inflation and suggested that the bank would continue to act at a fast pace.

Judging from the recent speeches of many senior officials, including Federal Reserve Chairman Powell, it is clear that the bank has made curbing inflation its top priority, and the main means of curbing inflation is to continue to significantly raise interest rates and shrink the table.

In addition, the author finds an interesting phenomenon: the recent economic indicators in the United States, except inflation, are generally lower than expected. For example, the data released earlier showed that the manufacturing index of the Federal Reserve of New York fell 11.6 in May, far lower than the expected 17 and 24.6 of the previous value.

More interesting is that Fed officials directly blame the slowdown in economic growth on price pressures.

According to the Fed, tightening policy will weaken the upward momentum of the economy, but since high inflation has hurt economic growth, there is no need to have too many concerns. The positive solution is to quickly raise interest rates and shrink the table!

Under such expectations, the medium and long-term sustained strength of the US dollar index will be a high probability event. However, it should be noted that the market has digested the aggressive interest rate hike expectation of the Federal Reserve to a certain extent. In the case of serious overbought, there may be a "traffic jam" in the dollar long trading, and the dollar index is facing the pressure of sharp decline and correction.

In the case of failure to rise above the 105 level for a long time, the dollar index may take advantage of the short-term trend to correct the recent rise, and the technical side also hinted at this possibility.

Technical analysis of US dollar index: deviation from the top of the pointer may lead to a certain degree of retreat

The daily chart of the US dollar index shows that the price started a new round of sharp rise on March 31, with a sharp rise of more than 7% in about a month and a half. It fell slightly after hitting 105.01 on May 13, and failed to rise above 105 for the time being.

At present, the KDJ index deviates from the top of the overbought zone, and there are signs of deadlock, suggesting that there is a strong downward correction pressure. Pay attention to the upward trend line since April 21. Once it falls, the market may further expand the decline. At that time, it will not rule out testing the upward trend line since March 31.

However, if maintained above the above two trend lines, the Bulls still have an advantage. If they fall behind the upward trend line since March 31, bears will get more breathing space, and there may be a greater retreat at that time.

If the price rises above the 105 level and stabilizes, it is expected to trigger more buying, which will stimulate the price to rise to 105.50, 106.00 and other levels.