DXY boosted by Fed hike expectation, US data and Kudlow

• The US dollar Index has taken back the 90.00 handle.
• Investors are pricing in a 25bps rate increase next week. 

The US dollar index is trading at around 90.13 up 0.42% on the day while it broke above a daily descending trendline. The greenback is up versus most major currencies as the day comes to an end.  

Thursday‘s data showed a decrease in initial jobless claims at 226k from 230 seen previously while the Empire State manufacturing index came in at 22.5 vs 15 expected as investors get ready for next week’s Federal Reserve meeting at which the central bank is widely expected to hike rates by 25 basis points. Earlier in the session, Kudlow, the newly appointed Trump’s top economist at the White House urged people to sell gold and buy the US dollar. However what could weigh on the USD long term are the Trump’s protectionist measure against China on top of the tariffs on steel and aluminum. 

Concerning Fed rate hikes Carsten Brzeski, Chief Economist at ING sees four rate hikes in the near future: “Back in December, only four out of 16 Fed members expected four hikes in 2018, so arithmetically it will take another four or five to join this camp for the median dot to move upwards. Whatever happens, with core inflation on the verge of returning to target and the economy continuing to perform strongly, we think the Fed will ultimately follow through with four rate rises this year.” 

DXY monthly chart

A seen on the monthly chart above, the market found support at the 50% Fibonacci retracement. Last month the bulls were able to close the bar at its top signaling intense bullish activity.

DXY daily chart

The market broke above the descending trendline suggesting that further upside might be in the cards. Nothing indicates that bears have the upper hands for the next 24h. 

DXY 15-minutes chart

The market broke above the R2 pivot which is usually a sign of bull strength.