- DXY continues to trade on a lower bias on Tuesday.
- The appetite for riskier assets continues to weigh on the dollar.
- New homes, building permits improve in September.
The US Dollar Index (DXY), which tracks the dollar against a set of its main competitors, remains depressed at the lower bound of the recent range near 93.15.
US Dollar Index Remains Politically Focused
The DXY loses more ground and challenges the 55-day SMA at the 93.30 region, at the same time recording new 5-day lows.
As is customary in recent days, investor bets on a final deal on the US political stage offering another fiscal stimulus package continue to rise and weigh further on the safe haven universe, prompting the index to fight once again at the 6-month resistance line, today around 93.65.
In the US data space, the recovery in the housing sector remains strong after the Housing Initiative and Building Permits expanded by 1,415 million units and 1,553 million units, respectively, during September. These results are in addition to Monday’s record reading in the NAHB index for the current month (85).
Later, R. Quarles of the FOMC (permanent voter, centrist) and C. Evans of the Chicago Fed (2021 voter, centrist) will also speak later in the session.
What to look for around USD
The index found solid containment in the 93.00 region so far this month. However, occasional bullish attempts are considered temporary as the underlying sentiment towards the dollar remains cautious. This view is reinforced by the Federal Reserve’s “longer low” stance, hopes for a strong recovery in the world economy, and mounting stakes for a “blue wave” victory in the presidential election. Developments around another US stimulus package also contribute to the vigilant stance around the dollar.
Technical levels
At the moment the index is shedding 0.24% to 93.20 and faces immediate containment at 93.01 (Oct 12 monthly low) followed by 92.70 (Sept 10 weekly low) then 91.92 (Fibonacci 23.6% from the fall of 2017-2018). On the other hand, a breakout above 94.20 (38.2% Fibonacci retracement of the 2017-2018 dip) would target 94.74 (September 25 monthly high) and finally 96.03 (50% Fibonacci decline 2017-2018).
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Credits: Forex Street
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