US Dollar Index challenges 4-month lows near 95.00

  • DXY remains under heavy selling pressure and approaches 95.00.
  • Better momentum in the risk complex weighs on the dollar.
  • House Price Index, Existing Home Sales, EIA report next in the US docket.

The greenback accelerated the downside on Tuesday and dragged the US Dollar Index (DXY) to fresh multi-month lows in the boundaries of the 95.00 mark.

US Dollar Index looks depressed near 95.00

The index is struggling for direction following three consecutive daily pullbacks, navigating in levels last seen in mid-March around the 95.0 yardstick against the backdrop of the strong improvement in the sentiment surrounding the risk-associated universe.

The sharp sell-off in the buck has opened the door to a potential test of the 2020 lows near 94.60 (March 9), although a mild rebound should not be ruled out either as per the current oversold conditions of DXY.

In the macro view, discussions regarding further stimulus in the US economy have not yielded any results yet other than the pick-up in the effervescence around the US political scenario. The dollar, in the meantime, remains depressed amidst the relentless reopening of the economy, auspicious results from domestic fundamentals and encouraging news regarding a potential coronavirus vaccine.

Later in the US data space, the FHFA will publish its House Price Index, seconded by Existing Home Sales and the weekly report on US crude oil supplies by the EIA.

What to look for around USD

The relentless advance of the COVID-19 pandemic in the US and across the world vs. the probability that a COVID-19 vaccine could be out in the medium-term plus the ongoing reopening of global economies are all driving the sentiment in the global markets and keep the dollar under downside pressure. On the constructive view of the dollar, 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. On another front, the speculative community kept adding to the offered note around the dollar for yet another week, opening the door to a potential development of a more serious bearish trend in the dollar.

US Dollar Index relevant levels

At the moment, the index is losing 0.06% at 95.10 and faces the next support at 95.05 (monthly low Jul.21) seconded by 94.65 (2020 low Mar.9) and then 94.20 (38.2% Fibo of the 2017-2018 drop). On the other hand, a break above 96.03 (50% Fibo of the 2017-2018 drop) would aim for 97.64 (55-day SMA) and finally 97.80 (weekly high Jun.30).

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