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US dollar DXY index comes under further pressure near 92.40 ahead of NFP

  • The DXY index continues to weaken near the 92.40 level.
  • Biden continues to lead the race for the White House.
  • NFP Non-Farm Payrolls will focus investors’ attention at the start of the US session.

The US Dollar DXY Index, which measures the strength of the dollar against a basket of major currencies, is under additional pressure from sales and moves through the zone of 2-month lows near the 92.40 level.

US Dollar Index DXY focuses attention on NFP and elections

The DXY index remains on the defensive so far this week and records losses for the fourth day in a row on Friday in the context of a persistent improvement in risk appetite.

In fact, the optimistic sentiment around riskier assets continues to be supported by growing expectations that Joe Biden could be the next US president even though there are still six states counting votes, including key ones like Georgia and Pennsylvania.

Also, while the stakes for a Biden presidency continue to rise, so is the likelihood that incumbent President Trump will contest the final results, which generates a continuous uncertainty in the political scene.

On the other hand, there was no major news from Thursday’s FOMC meeting. In fact, and coinciding with expectations, the Committee left its monetary policy unchanged as well as the average inflation target and its commitment to keep rates at low levels current for an extended period. However, the statement sounded a bit pessimistic after the Fed noted that despite the recovery, economic activity and employment still remain below pre-COVID levels.

Regarding the US data, the October NFP non-farm payroll report will focus investors’ attention at the start of the American session, followed in relevance by data on wholesale inventories and the change in credit to September consumer.

What can we expect around the USD?

The DXY index extends the slide and moves through 2-month lows around 92.40 amid a growing improvement in risk appetite. Meanwhile, the increasing likelihood of a Biden presidency continues to weigh on the dollar, although the prospects for a “blue wave” appear to have largely diminished by now. From a more macro perspective, the impact of the second wave of the pandemic on the global economy could favor the occasional resurgence of risk aversion and, therefore, offer some support to the dollar. The Fed left its “lower rates longer” stance unchanged, while very short-term fireworks remain on the table in light of the October release of the NFP non-farm payroll report.

Relevant levels of the US dollar index DXY

At the time of writing, the DXY index is shedding 0.31% on the day, trading at 92.34. Immediate support is at 92.45 (Nov. 6 low), followed by 91.92 (23.6% Fibonacci retracement from the 2017-2018 dip) and 91.80 (May 2018 low). On the other hand, a breakout of 94.08 (100-day SMA), would open the door to 94.30 (November 3 high) and finally 94.74 (September 25 high).

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Credits: Forex Street

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