US Dollar Index looks weaker and returns to the sub-97.00 area
- DXY remains choppy so far this week around the 97.00 area.
- Fed’s Powell reiterated there is high uncertainty regarding the recovery.
- Housing data, Powell’s testimony next of relevance in the US docket.
The US Dollar Index (DXY), which gauges the buck vs. a bundle of its main competitors, has returned to the negative territory and to the area below the 97.00 mark so far on Wednesday.
US Dollar Index focused on data and risk trends
The index is prolonging the erratic performance so far on Wednesday, although the bearish mood seems to prevail on the back of the recent re-emergence of appetite for the risk-associated space.
Indeed, the sharp rebound in US Retail Sales during last month (published on Tuesday) plus auspicious news of another treatment for the coronavirus (this time coming from the United Kingdom) have bolstered another pick-up in the risk-on mood and weighed on the buck on Tuesday.
Moving to Powell’s testimony before the Senate banking Committee on Tuesday, he reiterated that there is a great level of uncertainty surrounding the economic recovery regarding timing and strength. In addition, he noted that employment levels appear to be regaining traction while he said the Committee continue to evaluate the use of yield curve control.
In the docket, Housing Starts and Building Permits are due later in the NA session along with MBA Mortgage Applications and the weekly report on crude oil inventories by the EIA. Additionally, Chief Powell will testify once again, this time before the House Financial Services Committee and Cleveland Fed L.Mester (voter, hawkish).
What to look for around USD
The index is facing some selling interest on Wednesday following another wave of risk-on mood, relegating recent concerns over a probable second wave of coronavirus contagion and the impact on the economy. Other than that, and as usual in past weeks, price action around DXY is expected to track the performance of the broad risk appetite trends, US-China trade developments and the developments from the re-opening of the economy. On the constructive stance around the buck, bouts of risk aversion should support the investors’ preference for the greenback as a safe haven along with its status of global reserve currency and store of value.
US Dollar Index relevant levels
At the moment, the index is losing 0.18% at 96.85 and faces initial contention at 95.72 (monthly low Jun.10) followed by 95.03 (2019 low Jan.10) and then 94.65 (2020 low Mar.9). On the flip side, a break above 97.45 (high Jun.12) would aim for 97.87 (61.8% Fibo of the 2017-2018 drop) and finally 98.40 (200-day SMA).