FXCM's dollar basket, the USDOLLAR, has had a solid month (blue arrow). We note that its range from high to low is 458 points. This intensity is almost double the 5-month average true range (at 236 points), which has also kicked up (green rectangle). The RSI tends toward overbought (blue rectangle) but still has some room to move before registering as an excess. This month's candle has hit the upper red band, and the Bollingers themselves are diverging (black ellipses). This action is a sign of the expansion in volatility.
There is a confluence of fundamentals that are driving the greenback higher:
1. The Federal Reserve is looking to front-load its interest rate hikes in the coming months to stifle inflation.
2. Russia's invasion of Ukraine has caused supply shocks to key manufacturing inputs, and Russia has cut off the gas supply to Poland and Bulgaria.
3. Japan and China are easing policies, dealing with their growth issues.
Unless these show signs of change, the dollar seems supported in the medium term.
Senior Market Specialist
Russell Shor joined FXCM in October 2017 as a Senior Market Specialist. He is a certified FMVA® and has an Honours Degree in Economics from the University of South Africa. Russell is a full member of the Society of Technical Analysts in the United Kingdom. With over 20 years of financial markets experience, his analysis is of a high standard and quality.