In 2022, the world continues to be threatened by the new coronavirus variant virus, and the number of confirmed cases in Europe and the United States is still worrying. UK's situation improved slightly, but the number of confirmed cases in France and Italy reached a new high. The number of confirmed cases in the United States has exceeded 1 million in a single day. Some analysts have pointed out that the cumulative number of local deaths may exceed 1 million in early spring. Several provinces and cities in China, including Beijing, also have confirmed cases of Omicron. Although many experts have pointed out that Omicron has a low severity rate, if the infection does not ease in the short term, it will still cause pressure on the medical system and daily life. And the economy will also inevitably be dragged down. At the same time, the chairman of the US Federal Reserve believes that Omicron will only have a short-term impact on employment and the economy. The market believes that the Fed may more aggressively raise interest rates this year, and many officials have also expressed their support for this, expecting will be 3-4 times. However, the dollar continued to fall to the high of 96.50 at the beginning of the year. And the decline intensified after falling below the MA50 and the main support level of 95.50. It fell to around 94.50 in mid-January. 

The author believes that the decline of the US dollar this time mainly on the technical adjustment, and the upward trend keep unchanged. It's because the investors are relatively well prepared for the Fed to raise interest rates. A few days before the writing, the US exchange rate index has stopped falling from the average MA100 at 94.50 and has rebounded sharply. Believing that the benefit from the strength of the US 10-year Treasury bond yield rate, which once peaked at 1.9%, the market expect it may even challenge the 2% resistance. The author still believes that there are repeated changes on whether the dollar can quickly regain its upward trajectory or not. This is because some countries such as the United Kingdom and Canada have a great chance to raise interest rates soon, which may weaken the short-term advantages of US monetary policy. In addition, as of January 15, the number of people applying for unemployment benefits in the United States has increased by more than 50,000, and it has rebounded to 286,000, reflecting that the Omicron variant virus may have had some impact on the job market.  

Overall, the main uncertainty this year is still the epidemic. That would be a critical impact on the economic outlook and the stability of the supply chain. In addition, this year is a mid-term election year of the United States. If inflationary pressures ease, the Fed may not raise interest rates as fast as expected. Therefore, the US dollar can still be optimistic but should only buy at a low level. 95.30 and 94.50 are the two support levels of the US dollar index worth of attention, and the resistance should be 96, 96.50 and 97.

Patrick Law General Manager of Hantec Group