- The DXY index moves higher and recovers the 93.00 level.
- Prospects for stimulus are fading and pandemic fears benefit the dollar.
- New home sales data and the Chicago Fed index stand out on today’s calendar.
He US Dollar DXY Index, which measures the strength of the dollar against a basket of major currencies, extends Friday’s recovery and rises to new daily highs in the region of 93.00 at the beginning of the week.
US dollar index focuses attention on politics and pandemic
USD bulls regain control on Monday and lift the DXY index back above the 93.00 level amidst investors’ cash flows to the safe haven.
In fact, the likelihood that US lawmakers will agree on additional stimulus ahead of the November 3 presidential election continues to decline, along with the growing concern about the impact of the second wave of the coronavirus pandemic in the world economy.
Turning to US data, September new home sales data and the Chicago Fed Manufacturing Index will be released today. There is no scheduled speech from Fed members, as the Federal Reserve has entered its “period of silence” before the election.
What can we expect around the USD?
The DXY index managed to overcome the downward pressure observed during the past week and has recovered the level of 93.00 so far this Monday. The current recovery has come in response to reduced hopes of additional stimulus on the short-term horizon, coupled with the relentless advance of the pandemic. On the other hand, expectations of a “blue wave” victory in next month’s presidential elections continue to rise and continue to limit the rise of the dollar. The fragile outlook around the dollar is also reinforced by the Federal Reserve’s “lower rates for longer” stance.
Relevant levels of the US dollar index DXY
At the time of writing, the DXY index is gaining 0.30% on the day, trading at 93.02. A break above 93.90 (October 15 high), would expose 94.20 (38.2% Fibonacci retracement from the 2017-2018 dip) and 94.74 (September 25 high). On the other hand, immediate support is at 92.47 (October 21 low), followed by 91.92 (23.6% Fibonacci retracement from the 2017-2018 drop) and 91.80 (May 2018 low).
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Credits: Forex Street
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