The dollar index (DXY) is up another 0.24% today as price touched new highs around $104.20. USD is largely stronger today, and some key factors suggest that the dollar could be strong for the entire week. So, here are some reasons why you should buy USD now that we are at the start of a new week of risk-off sentiment.

Fed's More Hawkish Than We Thought

A statement by Fed chairman, Jerome Powell has caused more uncertainty in the market. He mentioned that a 50 basis point or higher rate hike would be "on the table"- a substantial rise from the original and doubling the <25 bp expectations. That statement ended up coming to fruition last week during the Fed rate decision. This sent the stock market spiraling downward while the USD got stronger. For a brief moment, stocks and risk-on pairs started to look bullish, but that rally did not last long at all.

Inflation has become way more serious than we initially thought as well. The US is now sitting at a whopping 8.5% inflation rate, a multi-decade high. It is hard to tell when the dollar will shift back to bearishness, but for this week at least, it looks like USD will be strong.

Bond Yields

US 10-year treasuries hit above 3.1% today and are hovering around 3.07% at the time of writing this. Yields are stating to look way more attractive than they were at the end of 2021 and the start of this year. In volatile market swings, investors are probably more interested in preserving their capital and keeping it somewhere safe like in the USD right now.

USD Trade Setups

USD/CAD

USDCAD just broke above a significant top on the 1D timeframe suggesting that the pair has broken out of its sideways trading. If the pair can close above this level, it would solidify this move and investors should be more inclined to long. On the other hand, price could also retrace after making this higher high and come back to support around 1.29154.

AUD/USD

AUDUSD fell to a key support level again on the 1D timeframe. This is a triple bottom for the year, but it looks like the pair will probably break under due to the amount of tests and failed rallies over time. if this level gets broken, we could likely see a test around 0.66751 where there is another level of clean support which is 4.5% below current price.

EUR/USD

Price is pretty unstable around this level on the 1D as we see long wicks from hard swings in both directions. Although this could be a minor rebound from the lows, price could fall right after testing resistance around 1.07673 if it does not break new lows before then. This long term downtrend will probably continue until we see a substantial fundamental shift in sentiment.