DXY US Dollar Index Turns Negative, Dropping Near 92.70 Level

The US Dollar DXY Index, which measures the strength of the dollar against a basket of major currencies, is losing momentum and pulls back from recent highs set above key 93.00 level.

DXY US Dollar Index focuses attention on politics and data

The DXY index halts the two-day recovery on Friday and falls back below the 93.00 level, while market participants now favor risk appetite during the European session.

Nothing new came out of the latest presidential debate between Trump and Biden late Thursday, and polls still favor the victory of the Democratic candidate. It is worth remembering that the so-called “blue wave” is expected to have a negative impact on the dollar.

Meanwhile, the dollar may gain additional support after the Speaker of the House of Representatives, N. Pelosi, rejected the possibility that the stimulus bill could be agreed before the November elections.

When it comes to US economic data, the focus will be on the release of Markit’s preliminary manufacturing and service PMI figures for the current month.

What can we expect around the USD?

The DXY index managed to get past the downward pressure seen at the beginning of the week and recovered the 93.00 level towards the end of the week. The current recovery has come together with reduced hopes for additional stimulus, at least on the short-term horizon. Meanwhile, and also weighing on the dollar, expectations of a “blue wave” victory in next month’s presidential elections continue to rise. The fragile outlook around the dollar is also reinforced by the Federal Reserve’s “low-for-longer” rate stance.

Relevant levels of the US dollar index DXY

At the time of writing, the DXY index is down 0.22% on the day, trading at 92.72. Immediate support is at 92.47 (Oct 21 low), followed by 91.92 (23.6% Fibonacci retracement from the 2017-2018 dip) and 91.80 (May 2018 low). On the upside, a break above 93.90 (Oct 15 high), would expose 94.20 (38.2% Fibonacci retracement from the 2017-2018 dip) and finally 94.74 (Sept 25 high).

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Credits: Forex Street

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