The US Dollar Index remains near multi-year lows, below 90.00

• The USD came under renewed selling pressure on Tuesday amid market optimism.
• Progress on additional US stimulus added to optimism and increased investor sentiment.
• Relatively weak liquidity conditions warrant some caution before placing further bearish bets on the USD.

The US Dollar Index (DXY), which tracks the dollar against a basket of major currencies, witnessed some new selling on Tuesday and fell back below 90.00.

The index was unable to capitalize on the previous day’s rebound attempt and has now fallen closer to the 32-month lows hit on Dec. 17 amid the prevailing upbeat weather in the market. US lawmakers pushed for an enhanced COVID-19 relief package and increased investor appetite for perceived riskier assets.

The U.S. House of Representatives voted Monday to increase the size of direct payments to qualified Americans from $ 600 to $ 2,000 and sent the measure to the Senate for a vote. This is due to the latest optimism about a Brexit deal and provided a strong boost to the already stronger global risk sentiment.

The risk appetite was evident from the underlying bullish tone in the equity markets. This, in turn, was seen as one of the key factors that continued to undermine the safe-haven status of the dollar. Even a modest rally in US Treasury yields did little to provide respite for USD bulls.

In the absence of major economic releases to move the market, US stimulus headlines and overall market risk sentiment will continue to influence USD price dynamics. Meanwhile, trading volumes remain meager amid the year-end holidays, warranting some caution before placing further bearish bets on the USD.

Technical levels