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US dollar DXY index bounces off lows near 90.00 level

  • The DXY index briefly tests new lows near the 90.00 level.
  • Initial jobless claims were 900,000 last week.
  • The Philadelphia Fed manufacturing index surprised to the upside with 26.5 points in January.

He US dollar DXY index, which measures the strength of the dollar against a basket of major currencies, is trading at lows of several days near the 90.00 support Thursday.

US dollar DXY index weakens on risk appetite

He predominant sentiment towards assets of higher perceived risk it puts the US dollar under further downward pressure and forces the DXY index to challenge psychological support near the 90.00 level.

The downward movement of the dollar occurs despite US 10-year benchmark bond yields recovering and above the area of ​​1.12%.

Regarding US data, weekly initial jobless claims reached 900,000 during the past week and the Philadelphia Fed manufacturing indicator improved to 26.5 points in the current month (from 9.1). Additionally, home starts and building permits also exceeded estimates by 1,669,000 units (+ 5.8%) and 1,709,000 units (+ 4.5%), respectively, during the last month of 2020.

What can we expect around the USD?

The DXY index rally lost steam at the 91.00 region earlier in the week, prompting a subsequent corrective move to the 90.20 zone. However, the occasional bullish attempts in the dollar are expected to be short-lived amid the fragile outlook for the dollar in the short / medium term for now amid massive fiscal and monetary stimulus in the US economy. In the US, the Federal Reserve’s “lower for longer” stance and the prospects for a strong recovery in the global economy.

Relevant levels of the US dollar DXY index

At the time of writing, the DXY index is shedding 0.32% on the day, trading at 90.18. The next support is at 89.20 (January 6 low), followed by 88.94 (March 2018 low) and 88.25 (February 2018 low). On the other hand, a break above 91.01 (December 21, 2020 high), would open the door to 92.10 (100-day SMA) and finally 92.46 (23.6% Fibonacci retracement of the 2020-2021 dip) .

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