The US Dollar Index Increased to a Two-Year High of 101.331 in Response to Fed Policymakers' Remarks

The US Dollar Index, which measures the greenback's value against a basket of six currencies, closed the week higher, up 0.62 percent to 101.118, though still shy of Friday's two-year high of 101.331.

Factors such as the Fed speaking throughout the week fueled the buck's thirst. Additionally, rising US Treasury yields bolstered the greenback, as the benchmark 10-year US Treasury yield ended the week at 2.903 percent, up from 2.69 percent the previous week.

Summary of the Federal Reserve's Address

Fed Chairman Jerome Powell approved a half-point rate hike by the May 4-5 meeting on Thursday. Meanwhile, money market futures have fully priced in a 0.50 percentage point increase in the Federal Funds Rate, bringing it to 1%.

Later that day, and as the final Fed speaker before the May meeting blackout, Cleveland Fed President Loretta Mester stated that she would like to see the Fed return to neutral by the end of the year. When asked about 75-bps rises, Mester said, "at this point, we do not need to go there." Additionally, she favored a 50-bps hike in May and a few additional increases thereafter.

Elsewhere, St. Louis Fed President James Bullard acknowledged that the Fed is behind the curve, but not as much as many believe, while noting that the Fed has previously lifted 75 basis points without the world imploding.

Mary Daly, president of the San Francisco Federal Reserve, stated that the Fed "would almost certainly" hike rates by 50 basis points over the next couple of sessions. According to Yahoo Finance Interview, she is open to contemplating the magnitude of required hikes. Daly underlined that the Fed should proceed cautiously with rate hikes and aim to raise rates to 2.5 percent by the end of the year.

The US Docket for the Coming Week

The US economic calendar would include March Durable Goods Orders, the US GDP for the first quarter, and March Core Personal Consumption Expenditure (PCE) on annual and monthly basis, in addition to the Chicago PMI.

According to ING analysts, the US economy increased at a 1-1.5 percent annualized pace in Q1, which would be lower than the 6.9 percent rate recorded in Q4 of 2021, reflecting the pandemic's Omicron wave, which had a significant impact on mobility.

"However, recent figures indicate a resurgence in activity, and we anticipate better second-quarter GDP growth. Durable goods orders, based on regional manufacturing data, the ISM survey, and increased Boeing aircraft orders, should also be healthy. That so, we foresee a little increase in housing data weakness as rising mortgage rates sap the home market's momentum."

Forecast for the US Dollar Index (DXY): Technical Analysis

As indicated by the daily chart, the US Dollar Index (DXY) maintains an upward tilt. The 50 and 200-day moving averages (DMAs), which are placed at 98.487 and 95.459, respectively, are significantly below the DXY value, reinforcing the bullish bias. At 67.22, the Relative Strength Index (RSI) has considerable space to spare if the DXY continues its ascent beyond January's 2017 highs of 103.82, before approaching overbought conditions. However, it would first have to overcome a few obstacles on its route north.

DXY's initial resistance level would be 102.00. A break above would reveal March's 24 daily high of 102.21, March's 2020 daily high of 102.99, and then the aforementioned 103.82 swing high.