​DXY Sees Grim Prospect

WikiFX News (19 Dec.) - Societe Generale this week discussed the USD long-term outlook and forecast a 5% fall for the Dollar Index (DXY) in 2021, with further losses to come in 2022.

This year's dramatic shift in Fed policy has wiped out most of the advantage, said SocGen. The bank expects the DXY to stand at 86.70 after a 5% loss as the global economy recovers from the pandemic.

Looking ahead, there are chances that the US sustains, or adjusts slightly, its ultra-low interest rates and ultra-loose monetary policies in the following period till 2021, which will weigh on the DXY.

Another hit to the DXY comes from Biden's stimulus measures after he takes office. The new stimulus package might be greater than $2 trillion by 2021.

Citibank also holds a bearish dollar view for 2021. The bank said vaccine rollout could cause the DXY to plunge over 10% next year.

Technically speaking, the DXY will continue to test the key support at 88 after breaching below the 90 mark in 2021, with the 84 level beckoning next. If nothing else, modest fluctuations will keep the DXY dipping into the 88-95 range.

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Chart: Trend of the DXY