- DXY gains more traction and is trading near 94.00.
- Confidence in risk rules global markets and underpins the dollar.
- Initial US claims increased more than expected by 898,000 per week.
The dollar, in terms of US dollar index (DXY), takes extra momentum and manages to test the key 94.00 barrier on Thursday.
US dollar index firm on risk aversion
The index climbs to multi-day highs near the 94.00 level in the second half of the week, always supported by the persistent risk aversion bias in global markets.
Indeed, growing fears about the impact on the global economy of the second wave of the coronavirus pandemic continue to fuel the safe haven space. This view is also reinforced by the stalemate surrounding another US fiscal stimulus bill.
However, the index fails to extend the move further north after initial weekly claims increased by 898,000, more than anticipated. Additional data showed that the Philadelphia Fed index improved to 32.3 for the current month and the New York Empire State Index fell to 10.50 for the same period.
What to look for around USD
The index remains so far supported by the 93.00 area in the context of alternate trends in risk appetite. Occasional bullish attempts, however, are considered temporary, as the underlying sentiment towards the dollar remains cautious or bearish. This view is reinforced by the Federal Reserve’s “Longer Low” stance, hopes for a strong recovery in the global economy, negative stance in the speculative community, and mounting stakes for a “blue wave” victory. ”In the November elections. Developments around another US stimulus package also contribute to the vigilant stance around the dollar.
At the moment, the index is gaining 0.43% to 93.80 and a break above 94.20 (38.2% Fibonacci retracement from the 2017-2018 drop) would target 94.74 (September 25 monthly high) and finally 94.70 ( 100-day SMA). On the downside, immediate support lines up at 93.01 (Oct 12 monthly low) followed by 92.70 (Sept 10 weekly low) and then 91.92 (23.6% Fibonacci from the 2017-2018 dip).
Credits: Forex Street