The USD Index (USDIDX) is down 0.11% today after testing resistance around the 103-point level yesterday. Over the past few weeks, essentially since the beginning of September, the dollar index has gained significantly after attempting to break below the 100-point barrier. However, at the current levels, we have seen strong downward reactions in the past when testing from below. Therefore, it is possible that after a brief consolidation, the dollar may resume its decline. This outlook is also supported by the prospect of another interest rate cut by the Fed.
The dollar remains close to overvaluation levels, based on the standard deviation of the USD TWI (Trade-Weighted Index) over the past 20 years. The index is calculated as a weighted average of the USD exchange rate against foreign currencies, with each country’s weight reflecting its share in trade. Considering this, we can observe that the value of the dollar is currently inflated, which may be primarily due to the uncertain macroeconomic situation and the challenges facing other economies around the world.
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