On March 30, in an article on Barchart, I asked, “Where is the Dollar Index Heading?” I ended that piece by writing, “The current short-term trend favors a test of 100, and a break could lead to much lower levels over the coming months.” On March 30, the most recent low in the index was 100.68. Since then, it has made a slightly lower low at 100.420 but has remained in the 100 to 106 range.
The U.S. dollar index measures the U.S. currency against the euro, pound, yen, C$, Swedish krona, and Swiss franc. The most significant component is the euro, as the index has a 57.6% exposure to the European currency. Meanwhile, economic and geopolitical events impact the worldwide currency markets, and the events since early 2022 may be changing the dollar’s role in the global financial system. Therefore, the index is a mirage as it only reflects the dollar’s value against foreign exchange instruments issued by U.S. allies.
