- The DXY index extends the move lower and falls below 92.00.
- Hopes for vaccines and increased stimulus support risk appetite in markets.
- US markets are closed due to the Thanksgiving holiday.
The US dollar DXY index, which measures the strength of the dollar against a basket of major currencies, remains under pressure for another day and falls back below the 92.00 level in the second half of the week.
US dollar index weakens due to risk appetite in markets
The DXY index loses ground for the third day in a row and is approaching 2020 lows in the region of 91.70 Thursday.
As usual in the previous days, optimism stemming from the imminence of a coronavirus vaccine, coupled with rising hopes for further stimulus, especially after J. Yellen’s nomination as Secretary of the Treasury, and the beginning of Biden’s transition have been contributing to the persistent downtrend on the US dollar.
Meanwhile, risk appetite continues to dominate global markets for the moment and opens the door to a weaker dollar in the short / medium term.
On the other hand, moderate price action is expected on Thursday and Friday due to the Thanksgiving holiday.
What can we expect around the USD?
The DXY index remains on the defensive and a visit to the 2020 lows near the 91.70 level is not ruled out on the near-term horizon. The improved risk appetite sentiment has been bolstered by a clearer US political landscape combined with upbeat news on vaccines and better growth prospects. In addition, hopes for additional fiscal stimulus have resurfaced, which together with the Federal Reserve’s “lower rates longer” stance is seen as keeping the USD under additional pressure for now.
Relevant levels of the US dollar DXY index
At the time of writing, the DXY index is down 0.02% on the day, trading at 91.97. The next support is at 91.84 (November 26 low), followed by 91.74 (September 1 low) and 89.22 (April 2018 low). On the other hand, a break of 93.20 (November 11 high), would open the door to 93.43 (100-day SMA) and finally 94.30 (November 4 high).
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