- The dollar remains on the defensive below the 90.00 level.
- Investors remain skewed toward riskier assets in the new year.
- Markit’s final manufacturing PMI will be released during the American session.
He US dollar DXY index, which measures the strength of the dollar against a basket of the main currencies, begins the year with a negative tone and is approaching 2020 lows near 89.50.
US Dollar DXY Index Looks Weak Below 90.00
The DXY index resumes falling and extends the move below the 90.00 level on Monday, as widespread sentiment continues to favor risk appetite.
In fact, investors continue to look beyond the pandemic, amid the launch of several vaccines and strong hopes for a global V-shaped rebound in economic activity. The current sentiment dominating riskier assets is also reinforced by the huge amount of fiscal and monetary stimulus delivered by the US government, the Fed, as well as many central banks and governments around the world.
Regarding US economic data, the only publication to highlight will be the final December manufacturing PMI measured by Markit, before the ISM manufacturing PMI (Tuesday), the ADP report and factory orders (Wednesday) , Initial Jobless Claims, and ISM Non-Manufacturing PMI (Thursday) and NFP Non-Farm Payrolls (Friday).
What can we expect around the USD?
The DXY index regains its downside momentum at the start of the new year, always supported by the widespread optimistic sentiment in risk appetite. In addition, the outlook for the dollar remains on the bearish side amid the increasing likelihood of additional monetary / fiscal stimulus in the US economy, the Federal Reserve’s “lower rates for longer” stance, and prospects for a strong economic recovery.
Relevant levels of the US dollar DXY index
At the time of writing, the DXY index is down 0.35% on the day, trading at 89.61. The next support is at 89.51 (December 31, 2020 low), followed by 89.22 (April 2018 low) and 88.94 (March 2018 low). On the upside, a breakout of 91.01 (December 21, 2020 high), would point to 91.23 (December 7, 2020 high) and finally 91.92 (23.6% Fibonacci retracement of the 2017-2018 dip) .
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