- The DXY index loses more momentum and tests the 90.20 region.
- The optimistic sentiment persists after Biden took office as president of the United States.
- Weekly jobless claims, the Philadelphia Fed index, and housing data stand out on the US calendar.
He US dollar DXY index, which measures the strength of the dollar against a basket of major currencies, extends the weekly downward correction up to the region of 90.20.
US dollar DXY index weakens on risk appetite
The DXY index loses ground for the third day in a row Thursday due to the persistent improvement in risk appetite.
In fact, the demand for assets with the highest perceived risk it has risen in recent hours, particularly after President Joe Biden’s inauguration on Wednesday. In fact, the probability of additional fiscal stimulus under the Biden Administrationalong with the launch of the vaccine, it supports reflation trading and is expected to continue to weigh on the USD in the short / medium term.
Also contributing to the decline in the DXY index, benchmark US 10-year bond yields have now clearly exceeded the 1.10% region and leave the door open for further pullback in the near term.
When it comes to US data, initial weekly jobless claims will focus investors’ attention at the start of the American session, along with the Philadelphia Fed manufacturing index, home starts and home permits. building.
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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